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Exide: A dream quarter! - Views on News from Equitymaster
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Exide: A dream quarter!
Jan 11, 2010

Performance summary
  • Topline grows by 16% YoY during the third quarter.
  • Operating margins witness a huge jump of 9.4%, leading to a 90% surge in operating profits during the quarter.
  • Bottomline grows by a strong 132% YoY for the quarter as depreciation and interest charges add further zing to the operating performance.
  • Bottomline for the nine month period grows 86% YoY on the back of a mere 6.5% topline growth, thanks once again to the strong operating performance.


(Rs m) 3QFY09 3QFY10 Change 9mFY09 9mFY10 Change
Net sales 7,892 9,129 15.7% 25,985 27,671 6.5%
Expenditure 6,744 6,942 2.9% 21,834 20,918 -4.2%
Operating profit (EBDITA) 1,149 2,187 90.4% 4,151 6,753 62.7%
EBDITA margin (%) 14.6% 24.0%   16.0% 24.4%  
Other income - 10   4 31 609.3%
Interest (net) 124 29 -76.5% 365 77 -78.9%
Depreciation 169 189 11.7% 501 598 19.5%
Profit before tax 857 1,980 131.2% 3,289 6,108 85.7%
Tax 295 675 128.8% 1,128 2,083 84.7%
Profit after tax/(loss) 562 1,305 132.4% 2,162 4,026 86.2%
Net profit margin (%) 7.1% 14.3%   8.3% 14.5%  
No. of shares (m) 800.0 800.0   800.0 800.0  
Diluted earnings per share (Rs)*         5.9  
Price to earnings ratio (x)*         20.7  
(* on trailing twelve months earnings)

What has driven performance in 3QFY10?
  • Exide’s topline grew by a strong 16% during the quarter. The performance was better than the second quarter where the topline growth was a modest 6%. The company supplies batteries to the automotive and industrial segments. During the quarter, the topline growth seems to have come primarily from the automotive segment. Here, buoyancy in the two-wheeler as well as four-wheeler segment as well as deeper market penetration boosted company sales. The industrial segment on the other hand, felt some heat on account of de-growth in the telecom sector. However, the company notched up strong numbers in its other industrial segments of power, traction and UPS and other infrastructural segments. And this brought about some respectability to the overall numbers from this segment. Going forward, the buoyancy in topline is expected to continue on account of the improved economic scenario.

    cost break up
    (Rs m) 3QFY09 3QFY10 Change 9mFY09 9mFY10 Change
    Raw materials 5,248 5,176 -1.4% 17,401 15,647 -10.1%
    % sales 66.5% 56.7%   67.0% 56.5%  
    Staff cost 456 552 21.2% 1,273 1,680 32.0%
    % sales 5.8% 6.0%   4.9% 6.1%  
    Other expenditure 1,040 1,214 16.7% 3,160 3,591 13.6%
    % sales 13.2% 13.3%   12.2% 13.0%  

  • Bringing about a substantial improvement in its operating performance, the company has managed to cut its raw material expenses by 1% during the quarter and hence, boost its operating profits by a strong 90% YoY. While a part of the improvement could be attributed to reduced prices of lead – Exide’s main raw material – the company also benefitted from sourcing nearly 40% of its lead and lead alloy requirements from its own captive smelters and also having made its cost structure more efficient by connecting tier II and tier III cities through a hub-and-spoke model. Had it not been for the 21% jump in staff costs, the growth in operating margins could have been even higher.

  • Exide's net profits saw a strong growth of 132% YoY during 3QFY10. This was led by operating margin expansion, lower than proportionate increase in depreciation and lower interest costs. The net margins improved to 14.3% from 7.1% during 3QFY09.

What to expect?
At the current price of Rs 122, the stock trades at a multiple of 14.6 times our estimated FY12 earnings per share of the company. While we expect the company to continue to put up a decent show in the forthcoming quarters, we believe that the current stock price fully reflect the medium term prospects of the company. As such, there could be negligible upside in the share price from the current levels. Furthermore, come next quarter and it could start running into the headwind of higher lead prices, its principal raw material.

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