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Exide Industries (EXID)
Automobiles
Better mix helps 4QFY11 beat estimates. 4QFY11 adjusted standalone profit of
Rs1.64 bn was 17% above our estimates driven by 8% higher-than-expected battery
sales and higher other operating income. We believe higher battery sales could be
attributed to (1) improvement in replacement battery to OEM battery mix over the last
quarter and (2) 3-5% increase in prices taken by Exide in February 2011. We retain our
target price, rating and estimates as of now.
Better product mix led to beat in estimates, EBITDA margins improved by 220 bps QoQ
4QFY11 adjusted standalone profit of Rs 1.64 bn was 17% above our estimates driven by 8%
higher-than-expected battery sales, higher other operating income and improvement in product
mix. We attribute higher battery sales to (1) improvement in replacement battery to OEM battery
mix over the past quarter and (2) 3-5% increase in prices taken by Exide in February 2011. The
company’s inventory days also increased to 29 days in FY2011 from 24 days in FY2010, which
indicates that company managed to offset a sharp rise in raw material prices by increasing the
inventory of lead in 1HFY2011 when lead prices were lower.
Staff costs increased sharply during the quarter due to ramp up in Ahmednagar plant. Excluding
the Rs200 mn by which other operating income exceeded estimates, adjusted profit was Rs1.5 bn
(7% higher than our estimates). EBITDA margins (ex Rs200 mn higher other operating income) was
17.4% (50 bps higher than our estimates, 200 bps qoq).
The company has spent Rs2.7 bn capex in FY2011 for increasing capacities and plans to spend
Rs3.7 bn in FY2012. Exide plans to increase 4 wheeler capacities to 10.6 mn and 12 mn by
April/October 2011 from 9.6 mn in March 2010. The company also plans to increase 2 wheeler
capacities from 10 mn in March 2010 to 21 mn by end of FY2013. It indicated in a press release
that capacity ramp-up will be visible from 2QFY12 which will help the company increase sales to
higher margin replacement automotive battery segment. We expect EBITDA margins to remain
around 17-18% in 1QFY12 before improving to 20-21% levels from 2QFY12.
Consolidated profits were dragged down by losses at overseas subsidiaries. According to our
estimates, losses at subsidiaries (ex insurance) increased to Rs1.1 bn from Rs888 mn. Smelters also
paid dividends of ~Rs 300 mn to the parent according to our calculation in FY2011 which will need
to be adjusted from our parent valuation as we value smelters separately.
We will review our rating and estimates after discussions with the management. A few things need
clarification (1) total volumes sold in 4QFY11 and FY2011, (2) proportion of replacement
automotive battery volume sales in overall volumes, (3) Industrial battery sales in FY2011 and in
4QFY11, (4) smelter profits in FY2011 and cost benefit achieved by smelters
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Exide Industries (EXID)
Automobiles
Better mix helps 4QFY11 beat estimates. 4QFY11 adjusted standalone profit of
Rs1.64 bn was 17% above our estimates driven by 8% higher-than-expected battery
sales and higher other operating income. We believe higher battery sales could be
attributed to (1) improvement in replacement battery to OEM battery mix over the last
quarter and (2) 3-5% increase in prices taken by Exide in February 2011. We retain our
target price, rating and estimates as of now.
Better product mix led to beat in estimates, EBITDA margins improved by 220 bps QoQ
4QFY11 adjusted standalone profit of Rs 1.64 bn was 17% above our estimates driven by 8%
higher-than-expected battery sales, higher other operating income and improvement in product
mix. We attribute higher battery sales to (1) improvement in replacement battery to OEM battery
mix over the past quarter and (2) 3-5% increase in prices taken by Exide in February 2011. The
company’s inventory days also increased to 29 days in FY2011 from 24 days in FY2010, which
indicates that company managed to offset a sharp rise in raw material prices by increasing the
inventory of lead in 1HFY2011 when lead prices were lower.
Staff costs increased sharply during the quarter due to ramp up in Ahmednagar plant. Excluding
the Rs200 mn by which other operating income exceeded estimates, adjusted profit was Rs1.5 bn
(7% higher than our estimates). EBITDA margins (ex Rs200 mn higher other operating income) was
17.4% (50 bps higher than our estimates, 200 bps qoq).
The company has spent Rs2.7 bn capex in FY2011 for increasing capacities and plans to spend
Rs3.7 bn in FY2012. Exide plans to increase 4 wheeler capacities to 10.6 mn and 12 mn by
April/October 2011 from 9.6 mn in March 2010. The company also plans to increase 2 wheeler
capacities from 10 mn in March 2010 to 21 mn by end of FY2013. It indicated in a press release
that capacity ramp-up will be visible from 2QFY12 which will help the company increase sales to
higher margin replacement automotive battery segment. We expect EBITDA margins to remain
around 17-18% in 1QFY12 before improving to 20-21% levels from 2QFY12.
Consolidated profits were dragged down by losses at overseas subsidiaries. According to our
estimates, losses at subsidiaries (ex insurance) increased to Rs1.1 bn from Rs888 mn. Smelters also
paid dividends of ~Rs 300 mn to the parent according to our calculation in FY2011 which will need
to be adjusted from our parent valuation as we value smelters separately.
We will review our rating and estimates after discussions with the management. A few things need
clarification (1) total volumes sold in 4QFY11 and FY2011, (2) proportion of replacement
automotive battery volume sales in overall volumes, (3) Industrial battery sales in FY2011 and in
4QFY11, (4) smelter profits in FY2011 and cost benefit achieved by smelters
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