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Exide: The non auto recharge - Views on News from Equitymaster

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Exide: The non auto recharge

Apr 27, 2009

Performance summary
  • Topline grows by 19% YoY during the fiscal
  • Operating margins slid by 30 basis points, leading to a slightly lower operating profit growth of 17% YoY
  • Higher interest costs and tax outgo put further pressure on the bottomline, enabling it to grow at 14% YoY for the full year
  • For the fourth quarter ended March 2009, bottomline has grown by 9% YoY on the back of a mere 1% growth in topline

(Rs m) 4QFY08 4QFY09 Change FY08 FY09 Change
Net sales 7,913 7,995 1.0% 28,449 33,974 19.4%
Expenditure 6,790 6,654 -2.0% 23,754 28,483 19.9%
Operating profit (EBDITA) 1,123 1,341 19.4% 4,695 5,492 17.0%
EBDITA margin (%) 14.2% 16.8%   16.5% 16.2%  
Other income 50 16 -67.5% 65 21 -68.1%
Interest (net) 126 114 -9.8% 374 479 28.0%
Depreciation 156 179 14.6% 642 679 5.8%
Profit before tax 891 1,065 19.4% 3,743 4,354 16.3%
Tax 263 383 45.4% 1,240 1,510 21.8%
Profit after tax/(loss) 628 682 8.6% 2,503 2,844 13.6%
Net profit margin (%) 7.9% 8.5%   8.8% 8.4%  
No. of shares (m) 750.0 800.0   750.0 800.0  
Diluted earnings per share (Rs)*         3.6  
Price to earnings ratio (x)*         14.9  
(* on trailing twelve months earnings)

What has driven performance in FY09?
  • Exide manufactures batteries for both the industrial and the automotive segments. During the fiscal, automotive segment witnessed a severe slowdown, hurting Exide’s growth in the OE (Original Equipment) space. However, thanks to the decent performance of the auto replacement battery segment, overall growth in the automotive segment remained positive. In the industrial segment, sub-segments like inverter, UPS and telecom performed exceptionally well, thus playing a key role in enabling the company to post a robust topline growth of 19% for the full year.

  • Exide’s operating margins have slid by 30 basis points in FY09. This is a vastly improved performance from the nine month period where margins were down by 140 basis points. Company basic raw material, lead, witnessed a massive correction in prices during the latter half of the fiscal, benefiting players like Exide. Furthermore, with the company relying on its own smelters for around 28% of its lead requirement, volatility in margins due to lead prices is likely to be rather subdued in the coming years. The company has also done well to keep its staff costs under check.

    cost break up
    (Rs m) 4QFY08 4QFY09 Change FY08 FY09 Change
    Raw materials 5,423 5,082 -6.3% 18,741 22,484 20.0%
    % sales 68.5% 63.6%   65.9% 66.2%  
    Staff cost 345 436 26.6% 1,510 1,709 13.2%
    % sales 4.4% 5.5%   5.3% 5.0%  
    Other expenditure 1,023 1,136 11.1% 3,503 4,290 22.5%
    % sales 12.9% 14.2%   12.3% 12.6%  

  • The company has reported a 28% YoY jump in interest costs during the fiscal and this has put further pressure on profits. Furthermore with tax outgo also growing at a greater rate than the growth in operating profits, bottomline growth has come in at 14% during the fiscal on a YoY basis.

What to expect?
At the current price of Rs 53, the stock is trading at a multiple of 9.5 times our estimated FY11 earnings. The company’s earnings for FY09 has come in 11% lower than our estimates. However, we remain positive on the long term prospects given Exide’s strong competitive advantages and the potential of the storage battery sector in India. We will soon come out with an updated report on the company.

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Mar 22, 2019 (Close)


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