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Exide Ind.: Inverters drive growth - Views on News from Equitymaster

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Exide Ind.: Inverters drive growth
Feb 10, 2015

Exide Industries has announced its December 2014 quarter results. The company has reported a 19.5% YoY and 25% YoY growth in topline and net profits respectively. Here is our analysis of the results.

Performance summary
  • Exide Industries reports a 19.5% YoY growth in topline during the quarter largely led by growth in inverters.
  • Operating margins improve by 0.7% to 11.6% resulting in the 26% YoY growth in operating profits.
  • Bottomline grows in tandem with operating profits at 25% YoY for the quarter.

Standalone financial snapshot
(Rs m) 3QFY14 3QFY15 Change 9mFY14 9mFY15 Change
Net Sales 13,039 15,587 19.5% 43,597 52,326 20.0%
Expenditure 11,613 13,785 18.7% 37,533 45,536 21.3%
Operating profit (EBITDA) 1,426 1,802 26.4% 6,064 6,790 12.0%
Operating profit margin (%) 10.9% 11.6%   13.9% 13.0%  
Other income 49 12 -74.8% 148 168 13.8%
Depreciation 317 352 11.2% 930 1,004 8.0%
Interest 4 8 97.4% 12 14 15.7%
Profit before tax 1,155 1,455 26.0% 5,269 5,940 12.7%
Tax 380 483 27.1% 1,720 1,858 8.0%
Profit after tax/(loss) 775 972 25.4% 3,549 4,083 15.0%
Net profit margin (%) 5.9% 6.2%   8.1% 7.8%  
No. of shares (m)       850.0 850.0  
Diluted earnings per share (Rs)*         6.4  
P/E ratio (x)*         29.4  
* Excluding others & inter-segment adjustments

What has driven performance in 3QFY15?
  • Exide reported revenue growth of 19.5% YoY during the quarter. Growth was largely driven by increase in volumes in both the automotive and industrial segments as there was no increase in pricing. In the industrial segment, inverters did well with revenues up by around 50% YOY. In the automotive segment, growth came mostly from the replacement side as OEM sales remained flat.

  • On the margins front, the company witnessed an expansion to the tune of 0.7% YoY during the quarter. This was on account of a fall in employee costs and other expenditure (as percentage of sales). Raw material costs, however, increased by around 1.7% to 67% of sales.

  • Bottomline grew in tandem with operating profits at 25% YoY.
What to expect?
At the current price of around Rs 187, the stock trades at around 17.3 times our projected FY17 earnings per share. We expect Exide's growth to ramp up a revival in the economy as well as the auto sector takes place. The company is also looking to spend on technology upgradation, which would enable it to launch new products in the automobile battery space. In the meanwhile, Amara Raja Batteries will continue to remain a tough competitor, although we believe that there is enough room for both the players to grow in the battery market. However, the stock price of Exide Industries has run up in the last few months and so even after factoring in a recovery, current valuations do not leave room for much upside. Consequently, we maintain our Sell view on the stock of Exide Industries.

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