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Exide Industries (EXID.BO) Rs131.35
Negative News – Estimates Under Review Equity Research
First Take: below estimates on significant margin surprise
News
Exide Industries reported 2QFY12 net income of Rs512mn, down 69% yoy,
69% qoq, 62% below Bloomberg consensus and 66% below our estimates.
While revenue was about 4% above our expectations at Rs11.7bn (up 4%
yoy and 5.5% qoq), EBITDA margin was 7.7% for the quarter, vs 21.8% in
2QFY11 and 17.9% in 1QFY12. In the previous 18 quarters, this is the first
time the company has reported single-digit EBITDA margins. Raw material
cost as a percentage of sales was 72.3%, the highest since FY07, vs 63.5%
in 1QFY12 and 59.3% in 2QFY11, which probably explains the
disappointment in the results, in our view. The company also reported a
decline in stock in trade and work in progress of Rs1.4bn, included under
expenditures during the quarter.
Analysis
As per the company, sales volume in the auto replacement and industrial
battery segments did not take off to the extent earlier envisaged by
management. As a result, volumes were down 5% yoy (weaker volumes
were in line with our expectations), resulting in adverse operating leverage
during the quarter. Exide also reported encouraging initial sales reports
from test marketing its own range of inverters under the Chloride brand
name. The company had cash reserves of Rs5bn at the end of the quarter.
Implications
We believe Exide’s results were likely affected by an adverse product mix,
raw material cost and pricing in the more profitable auto replacement and
industrial segments. Our 12-month TP is unchanged, but we put our
estimates under review and will come back with updated views after
speaking with management.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Exide Industries (EXID.BO) Rs131.35
Negative News – Estimates Under Review Equity Research
First Take: below estimates on significant margin surprise
News
Exide Industries reported 2QFY12 net income of Rs512mn, down 69% yoy,
69% qoq, 62% below Bloomberg consensus and 66% below our estimates.
While revenue was about 4% above our expectations at Rs11.7bn (up 4%
yoy and 5.5% qoq), EBITDA margin was 7.7% for the quarter, vs 21.8% in
2QFY11 and 17.9% in 1QFY12. In the previous 18 quarters, this is the first
time the company has reported single-digit EBITDA margins. Raw material
cost as a percentage of sales was 72.3%, the highest since FY07, vs 63.5%
in 1QFY12 and 59.3% in 2QFY11, which probably explains the
disappointment in the results, in our view. The company also reported a
decline in stock in trade and work in progress of Rs1.4bn, included under
expenditures during the quarter.
Analysis
As per the company, sales volume in the auto replacement and industrial
battery segments did not take off to the extent earlier envisaged by
management. As a result, volumes were down 5% yoy (weaker volumes
were in line with our expectations), resulting in adverse operating leverage
during the quarter. Exide also reported encouraging initial sales reports
from test marketing its own range of inverters under the Chloride brand
name. The company had cash reserves of Rs5bn at the end of the quarter.
Implications
We believe Exide’s results were likely affected by an adverse product mix,
raw material cost and pricing in the more profitable auto replacement and
industrial segments. Our 12-month TP is unchanged, but we put our
estimates under review and will come back with updated views after
speaking with management.
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