Quick Comment: Exide posted a good set of numbers with top-line, EBITDA and net income growth of 5% YoY, 13% YoY, and 4% YoY, respectively. Net income was 15% ahead of our expectations and 8% ahead of consensus expectations, according to Bloomberg. The entire beat came from gross margin expansion, reflecting better mix and lower commodity prices. We expect both trends to reverse in part in F2Q as lead prices in INR terms are up 7% currently vs. QE June average. Remain EW.
Top line grew 5% YoY: OEM sales were down across segments during the quarter, so most of top-line growth came from the replacement side. Inverter segment also posted strong growth in April, but it tapered off with the early onset of monsoons.
Gross margin expanded 80bp YoY: F1Q tends to be heavy on inverter sales, and thus the gross margin tends to expand (Exhibit 5). However, we were surprised positively by the quantum of expansion as gross margin rose 80bp YoY and 277bp QoQ. In our view, the expansion was driven by: 1) better product mix (OEMs sales were low so most of the volume came from the replacement side and inverter sales were up QoQ); and 2) the drop in lead prices post the February price hike. Although the company instituted a price hike in early July, it may not be enough to offset the recent rise in commodity prices (given the weak INR).
Overall EBITDA margin expanded from 15% in F1Q13 to 16.1% in F1Q14.
Net income was up 4%: Tax rate rose as other income was low (reflecting of cash payout to buy full control of the insurance business). Overall, net income came at Rs1.6bn up 4%YoY.
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Top line grew 5% YoY: OEM sales were down across segments during the quarter, so most of top-line growth came from the replacement side. Inverter segment also posted strong growth in April, but it tapered off with the early onset of monsoons.
Gross margin expanded 80bp YoY: F1Q tends to be heavy on inverter sales, and thus the gross margin tends to expand (Exhibit 5). However, we were surprised positively by the quantum of expansion as gross margin rose 80bp YoY and 277bp QoQ. In our view, the expansion was driven by: 1) better product mix (OEMs sales were low so most of the volume came from the replacement side and inverter sales were up QoQ); and 2) the drop in lead prices post the February price hike. Although the company instituted a price hike in early July, it may not be enough to offset the recent rise in commodity prices (given the weak INR).
Overall EBITDA margin expanded from 15% in F1Q13 to 16.1% in F1Q14.
Net income was up 4%: Tax rate rose as other income was low (reflecting of cash payout to buy full control of the insurance business). Overall, net income came at Rs1.6bn up 4%YoY.
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