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Exide Industries Limited
Investment Profile: Aggressive Horizon: 1-1.5 Yrs
Business Summary
Exide Industries Limited (EIL) is the biggest lead acid battery manufacturer in the country. The company manufactures a wide range of storage batteries for industries such as automobiles, railways, telecom, power plants, solar cells and submarines (incidentally EIL is just one amongst 5 companies in the world that can manufacture submarine batteries).
Investment Rationale
EIL has pretty much all the characteristics that are becoming of an industry leader right from dominant market share both in the OEM market as well as replacement market, 7 manufacturing plants diversified across the country, a pan-India distribution network of 4000 dealer outlets, 202 area offices and 40 branches spread over 9 regions, pricing power, resplendent brand equity and preferred supplier status. One of the most attractive features of EIL is that in possesses 2 in-house lead smelters that enable the company to source a considerable (42% in FY10, 55% In FY11e and 70% in FY12e) portion of its total lead requirements at a 10-15% discount to international prices on the LME. EBITDA margins shot up from 16% to the 23% trajectory largely due to the influence of these smelters. In the current fiscal, EIL has struggled with capacity constraints forcing it to concede market share in the replacement market but that is set to change with the company investing Rs.600 crore for the FY11-FY12 for capacity additions. Installed capacity is forecasted to grow by 24% CAGR over the next 2 years compared to the historical figure of 9-10%. We have employed an FY13 PE multiple of 15 times and the price target works out to Rs.128. This target is based on the premise that avg. price realizations will grow by 6% yoy (Prior to Exide's price cut problems my median price realization growth was 7% yoy). If one were to revert price realizations to the 7% and make adjustments to the sales volume figure one gets an enhanced target of Rs.131. With regard to DCF based on current parameters the fair value of the stock stands at Rs.101. However if price realizations were to go up from 6% to 7% and sales volume were adjusted. Then the fair value rises to Rs. 123. Moderate to aggressive risk investors who are willing to look beyond core auto stocks can consider investing in the EIL stock buying the stock at Rs.<101 levels.
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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Exide Industries Limited
Investment Profile: Aggressive Horizon: 1-1.5 Yrs
Business Summary
Exide Industries Limited (EIL) is the biggest lead acid battery manufacturer in the country. The company manufactures a wide range of storage batteries for industries such as automobiles, railways, telecom, power plants, solar cells and submarines (incidentally EIL is just one amongst 5 companies in the world that can manufacture submarine batteries).
Investment Rationale
EIL has pretty much all the characteristics that are becoming of an industry leader right from dominant market share both in the OEM market as well as replacement market, 7 manufacturing plants diversified across the country, a pan-India distribution network of 4000 dealer outlets, 202 area offices and 40 branches spread over 9 regions, pricing power, resplendent brand equity and preferred supplier status. One of the most attractive features of EIL is that in possesses 2 in-house lead smelters that enable the company to source a considerable (42% in FY10, 55% In FY11e and 70% in FY12e) portion of its total lead requirements at a 10-15% discount to international prices on the LME. EBITDA margins shot up from 16% to the 23% trajectory largely due to the influence of these smelters. In the current fiscal, EIL has struggled with capacity constraints forcing it to concede market share in the replacement market but that is set to change with the company investing Rs.600 crore for the FY11-FY12 for capacity additions. Installed capacity is forecasted to grow by 24% CAGR over the next 2 years compared to the historical figure of 9-10%. We have employed an FY13 PE multiple of 15 times and the price target works out to Rs.128. This target is based on the premise that avg. price realizations will grow by 6% yoy (Prior to Exide's price cut problems my median price realization growth was 7% yoy). If one were to revert price realizations to the 7% and make adjustments to the sales volume figure one gets an enhanced target of Rs.131. With regard to DCF based on current parameters the fair value of the stock stands at Rs.101. However if price realizations were to go up from 6% to 7% and sales volume were adjusted. Then the fair value rises to Rs. 123. Moderate to aggressive risk investors who are willing to look beyond core auto stocks can consider investing in the EIL stock buying the stock at Rs.<101 levels.
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