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Exide: A strong finish to the year - Views on News from Equitymaster
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Exide: A strong finish to the year
Apr 28, 2010

Exide Ltd has announced its FY10 results. The company has reported a 12% YoY and 89% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Net sales grow by 29% YoY during 4QFY10.
  • Operating profits grow an impressive 62% YoY as the company manages to slash certain costs.
  • Higher other income as well as benign depreciation charges further boost bottomline, which witnesses a huge 97% YoY during the fourth quarter.
  • Net profit for the full year grows by 89% YoY on the back of a 12% growth in topline.

(Rs m) 4QFY09 4QFY10 Change FY09 FY10 Change
Net sales 7,995           10,303 28.9%           33,974     37,974 11.8%
Expenditure 6,654 8,128 22.1%           28,483     29,046 2.0%
Operating profit (EBDITA) 1,341 2,175 62.2% 5,492        8,928 62.6%
EBDITA margin (%) 16.8% 21.1%   16.2% 23.5%  
Other income 16 57 250.3% 21 88 325.2%
Interest (net) 114 26 -77.3% 479       103 -78.5%
Depreciation 179 208 16.4% 679           807 18.7%
Profit before tax 1,065 1,998 87.7% 4,354        8,106 86.2%
Tax 383 653 70.6% 1,510        2,735 81.1%
Profit after tax/(loss) 682 1,346 97.3% 2,844        5,371 88.9%
Net profit margin (%) 8.5% 13.1%   8.4% 14.1%  
No. of shares (m) 800.0 850.0   800.0        850.0  
Diluted earnings per share (Rs)*                    6.3  
Price to earnings ratio (x)*         19.8  
(* on trailing twelve months earnings)

What has driven performance in FY10?
  • Exide closed the year FY10 with revenue growth of 12% YoY. It should be noted that growth for the first nine months stood in the region of 7% YoY. Hence, thanks to a buoyant fourth quarter, where topline growth came in at 29% YoY, topline for the full year saw a double digit growth. We believe since a good part of company’s revenues comes from the OEM segment and since increase/decrease in the price of major raw materials such as lead is a pass through, lackluster topline growth during the first three quarters would have been a consequence of lower lead prices. However, with lead prices going up and with volumes also remaining buoyant, topline for the fourth quarter has grown at a strong pace. Going forward, with volumes on the domestic front as well as realizations expected to remain firm, topline growth should continue to remain buoyant for the company.

    Cost break-up...
    (Rs m) 4QFY09 4QFY10 Change FY09 FY10 Change
    Raw materials 5,082 6,147 20.9% 22,362 21,747 -2.7%
    % sales 63.6% 59.7%   65.8% 57.3%  
    Staff cost 436 572 31.1% 1,709 2,252 31.8%
    % sales 5.5% 5.5%   5.0% 5.9%  
    Other expenditure 1,136 1,410 24.1% 4,412 5,047 14.4%
    % sales 14.2% 13.7%   13.0% 13.3%  

  • While higher lead prices seemed to have boosted Exide’s topline during the quarter, these have impacted margins negatively. In fact, margins for 4QFY10 have been the lowest of all the four quarters of FY10. Nevertheless, thanks to the company’s policy of relying more on recycled lead, margins have been significantly higher on a YoY basis. Higher wage costs have also exerted pressure on margins.

  • Thanks to more than three-fold jump in other income and significantly lower interest expenses, bottomline for the quarter has grown a strong 97% on a YoY basis. Similar factors also contributed towards the 89% growth in net profits that the company managed to achieve during the year.

What to expect?
At the current price of Rs 124, the stock trades at a multiple of 15 times our estimated FY12 earnings per share. The company has done exceedingly well in the year gone by and given its strong brand recall, technological prowess and extensive reach, we remain positive on the company’s ability to keep adding to shareholder value over the long-term.

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