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Exide Industries Ltd.
Banking on H2 recovery
„Cutting EPS and PO on weaker Q1
Q1FY12 net profit at Rs1.63bn came in 10% below estimate and is flat y-o-y.
Disappoint was owing to (1) decline in demand for batteries for residential power
back up (inverters) and (2) lack of market share gain in automotive replacement
market. We have cut EPS for FY12e and FY13e by 12% and 5% respectively owing
lower volume and margin. We have cut PO to Rs180 on lower earnings estimates.
„Margins recovery continues albeit slow
Exide reported 50bp q-o-q expansion in EBITDA margin for automotive segment
and 200bp in industrial battery segment in Q1FY12 driven by better product mix.
Company however could increase price by around 5% while raw material cost
jumped by 21% on a y-o-y basis. Overall EBITDA margin at 17.9% in Q1FY12
declined 80bp q-o-q owing to seasonal decline in the submarine batteries.
Stronger growth from H2 quite likely
We expect profit growth of 35% in H2FY12e and 34% in FY13e compared to flat
growth in H1FY12. Key drivers of stronger growth will be (1) cyclical recovery in
replacement battery sales (2) expansion of dealer network by 20% and higher
capacity along with stronger thrust on brand promotion.
Maintain Buy on earnings recovery within six months
Exide likely faces the headwind of (1) one more quarter of no growth, and (2) macro
uncertainty owing to rise in interest rate. However we maintain Buy as we expect
company to enter strong growth zone within six months. Our PO is based on 15x
FY13e EPS and Rs12/sh for the 50% stake in ING Vysya Life Insurance.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Exide Industries Ltd.
Banking on H2 recovery
„Cutting EPS and PO on weaker Q1
Q1FY12 net profit at Rs1.63bn came in 10% below estimate and is flat y-o-y.
Disappoint was owing to (1) decline in demand for batteries for residential power
back up (inverters) and (2) lack of market share gain in automotive replacement
market. We have cut EPS for FY12e and FY13e by 12% and 5% respectively owing
lower volume and margin. We have cut PO to Rs180 on lower earnings estimates.
„Margins recovery continues albeit slow
Exide reported 50bp q-o-q expansion in EBITDA margin for automotive segment
and 200bp in industrial battery segment in Q1FY12 driven by better product mix.
Company however could increase price by around 5% while raw material cost
jumped by 21% on a y-o-y basis. Overall EBITDA margin at 17.9% in Q1FY12
declined 80bp q-o-q owing to seasonal decline in the submarine batteries.
Stronger growth from H2 quite likely
We expect profit growth of 35% in H2FY12e and 34% in FY13e compared to flat
growth in H1FY12. Key drivers of stronger growth will be (1) cyclical recovery in
replacement battery sales (2) expansion of dealer network by 20% and higher
capacity along with stronger thrust on brand promotion.
Maintain Buy on earnings recovery within six months
Exide likely faces the headwind of (1) one more quarter of no growth, and (2) macro
uncertainty owing to rise in interest rate. However we maintain Buy as we expect
company to enter strong growth zone within six months. Our PO is based on 15x
FY13e EPS and Rs12/sh for the 50% stake in ING Vysya Life Insurance.
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