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Exide Industries
Good Hedge Against OEM
Slowdown
Quick Comment – Positive Outlook: We hosted the
fourth quarter earnings call for Exide Industries chaired
by Mr T.V. Ramanathan, MD and CEO and Mr. A.K.
Mukherjee, Director Finance. While management
remains positive on the growth plans and outlook for the
company, we also see Exide as a good hedge in a
scenario of slowing OEM sales and a strong upcoming
replacement cycle, and thus remain OW. Below are
some key takeaways from the conf call:
• Growth Outlook: Management guided for a
22%-25% volume growth in the Automotive
segment and 15% volume growth in the
Industrial segment in F12 for Exide. The
company expects automotive volume growth to
be supported by 15%-20% growth in 4W OEM
segment and 30-40% growth in the 2W OEM
segment. Management guided for a blended
top-line growth of 25% for F12 supported by
18-20% on the industrial segment and 25-27%
on the automotive side, 19-20% sustainable
EBITDA margin and 20% PAT growth in FY12.
On the battery industry growth, the company
expects around 15-20% growth in 4W OEMs ,
20-25% for 2W OEMs , 20% plus growth in auto
replacement and 15-17%growth in the
industrial segment in F12.
• OEM growth to moderate: Management
expects OEM segment growth to moderate in
the coming year. We believe that this will be
beneficial for Exide given that in such a
scenario the company will be able to divert
supplies to the high margin replacement
segment.
• Capex: Exide has a planned capex of Rs3.75bn
on capacity expansion and an additional
Rs250mn allocated for investment in
subsidiaries for FY12.
• New capacity expansion plans on track: 1) 4W
capacity as at end of FY11 stands at 9.7mn
batteries, expected to expand to 12mn units by
FY12. 2) 2W capacity is expected to increase
from 16.6mn as at end of FY11 to 21mn by end of
FY12. 3) Industrial capacity to increase from
2.26bn Ampere Hours to 2.42bn Ampere Hours in
FY12 primarily in the non-telecom space.
• Insurance business losses have significantly
come down (share of insurance venture loss in
F11 was Rs350mn vs F10 share in insurance
venture loss of Rs684mn). Management expects
the share of losses to break even by June 2012.
Management also expects investment in the
venture to come down significantly.
• Aim to improve Replacement:OEM ratio:
Target 4W Replacement:OEM ratio at 1.4:1 in the
coming quarters (4QF11 ratio at 1.11:1 vs 1.38:1
in FY10 and 1.51 in 1QFY10). This improved mix
towards replacement will augur well for the
company’s margins, we expect.
• Capacity Utilisation: While the automotive
segment is running at full utilization, the Inverter
capacity has around 80-85% utilization and the
telecom is running at less than 50% utilization.
• Concerns: The uptrend in lead prices forms the
core concern for the management. To circumvent
the volatility of lead prices on margins,
management continues to focus on increasing
in-house sourcing of lead, (currently 53 % of lead
requirement is procured internally), expects it to
go up to 58% by FY12.
• Other key points: 1) Management plans to
increase focus on expanding distribution network
and increase dealer network in the coming year.
2) OEM market share steady at 72%; organised
replacement market share at 65%, aims to grow
back to 70% by FY12 post capacity expansion.
3) No significant pricing actions taken in
3Q/4QFY11; management expects to take
appropriate pricing action post capacity
expansion.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Exide Industries
Good Hedge Against OEM
Slowdown
Quick Comment – Positive Outlook: We hosted the
fourth quarter earnings call for Exide Industries chaired
by Mr T.V. Ramanathan, MD and CEO and Mr. A.K.
Mukherjee, Director Finance. While management
remains positive on the growth plans and outlook for the
company, we also see Exide as a good hedge in a
scenario of slowing OEM sales and a strong upcoming
replacement cycle, and thus remain OW. Below are
some key takeaways from the conf call:
• Growth Outlook: Management guided for a
22%-25% volume growth in the Automotive
segment and 15% volume growth in the
Industrial segment in F12 for Exide. The
company expects automotive volume growth to
be supported by 15%-20% growth in 4W OEM
segment and 30-40% growth in the 2W OEM
segment. Management guided for a blended
top-line growth of 25% for F12 supported by
18-20% on the industrial segment and 25-27%
on the automotive side, 19-20% sustainable
EBITDA margin and 20% PAT growth in FY12.
On the battery industry growth, the company
expects around 15-20% growth in 4W OEMs ,
20-25% for 2W OEMs , 20% plus growth in auto
replacement and 15-17%growth in the
industrial segment in F12.
• OEM growth to moderate: Management
expects OEM segment growth to moderate in
the coming year. We believe that this will be
beneficial for Exide given that in such a
scenario the company will be able to divert
supplies to the high margin replacement
segment.
• Capex: Exide has a planned capex of Rs3.75bn
on capacity expansion and an additional
Rs250mn allocated for investment in
subsidiaries for FY12.
• New capacity expansion plans on track: 1) 4W
capacity as at end of FY11 stands at 9.7mn
batteries, expected to expand to 12mn units by
FY12. 2) 2W capacity is expected to increase
from 16.6mn as at end of FY11 to 21mn by end of
FY12. 3) Industrial capacity to increase from
2.26bn Ampere Hours to 2.42bn Ampere Hours in
FY12 primarily in the non-telecom space.
• Insurance business losses have significantly
come down (share of insurance venture loss in
F11 was Rs350mn vs F10 share in insurance
venture loss of Rs684mn). Management expects
the share of losses to break even by June 2012.
Management also expects investment in the
venture to come down significantly.
• Aim to improve Replacement:OEM ratio:
Target 4W Replacement:OEM ratio at 1.4:1 in the
coming quarters (4QF11 ratio at 1.11:1 vs 1.38:1
in FY10 and 1.51 in 1QFY10). This improved mix
towards replacement will augur well for the
company’s margins, we expect.
• Capacity Utilisation: While the automotive
segment is running at full utilization, the Inverter
capacity has around 80-85% utilization and the
telecom is running at less than 50% utilization.
• Concerns: The uptrend in lead prices forms the
core concern for the management. To circumvent
the volatility of lead prices on margins,
management continues to focus on increasing
in-house sourcing of lead, (currently 53 % of lead
requirement is procured internally), expects it to
go up to 58% by FY12.
• Other key points: 1) Management plans to
increase focus on expanding distribution network
and increase dealer network in the coming year.
2) OEM market share steady at 72%; organised
replacement market share at 65%, aims to grow
back to 70% by FY12 post capacity expansion.
3) No significant pricing actions taken in
3Q/4QFY11; management expects to take
appropriate pricing action post capacity
expansion.
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