Exide Ind.: Regains market share - Views on News from Equitymaster

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Exide Ind.: Regains market share

Apr 30, 2013

Exide Industries announced the fourth quarter results of financial year 2012-2013 (4QFY13). The company reported a 6% YoY and 3% YoY growth in revenues and net profits respectively. Here is our analysis of the results.

Performance summary
  • Net sales grow by 6% YoY led by growth in the replacement market.
  • Operating margins decline by 1.3% YoY to 13.3% in 4QFY13 largely due to higher other expenditure (as a percentage of sales).
  • Despite the 4% YoY fall in operating profits, net profits grow by 3% YoY led by higher other income.

Standalone financial snapshot
(Rs m) 4QFY12 4QFY13 Change FY12 FY13 Change
Net Sales 14,541 15,412 6.0% 51,136 60,768 18.8%
Expenditure 12,415 13,368 7.7% 44,262 52,873 19.5%
Operating profit (EBITDA) 2,127 2,044 -3.9% 6,874 7,895 14.9%
Operating profit margin (%) 14.6% 13.3%   13.4% 13.0%  
Other income 148 304 105.9% 637 704 10.5%
Depreciation 273 288 5.5% 1,007 1,135 12.7%
Interest 10 8 -22.0% 53 42 -21.3%
Profit before tax 1,992 2,053 3.1% 6,452 7,423 15.1%
Tax 567 588 3.9% 1,840 2,195 19.3%
Profit after tax/(loss) 1,425 1,465 2.8% 4,612 5,228 13.4%
Net profit margin (%) 9.8% 9.5%   9.0% 8.6%  
No. of shares (m)       850.0 850.0  
Diluted earnings per share (Rs)*         6.2  
P/E ratio (x)*         21.5  
* On a trailing 12-months basis

What has driven performance in FY13?
  • Exide Industries (Exide) recorded a decent 19% YoY growth in revenues during FY13. Although demand in the automotive OE segment remained dampened during the year due to the ongoing slowdown in the Indian automotive industry, robust growth in the replacement market was able to compensate for this. The company managed to regain market share in the replacement market towards the end of the fiscal. In the industrial segment, while there was some improvement in demand for the company's UPS batteries in the fourth quarter, overall growth for the year remained subdued due to lack of buoyancy in other infrastructure sectors.

    Cost break-up...
    (Rs m) 4QFY12 4QFY13 Change FY12 FY13 Change
    Raw materials/ purchases 9,735 10,336 6.2% 34,360 40,387 17.5%
    % of sales 66.9% 67.1%   67.2% 66.5%  
    Employee costs 746 901 20.7% 2,862 3,493 22.0%
    % of sales 5.1% 5.8%   5.6% 5.7%  
    Other expenditure 1,934 2,131 10.2% 7,040 8,993 27.8%
    % of sales 13.3% 13.8%   13.8% 14.8%  

  • Exide's operating profits grew by 15% YoY during the year as costs grew at a slightly faster pace than sales. The company's operating margins shrunk by 0.4% YoY to 13% in FY13 on the back of higher other expenditure (as a percentage of sales). Other expenditure increased from 13.8% of sales in FY12 to 14.8% in FY13.

  • Led by the 15% YoY growth in operating profits, net profits grew by 13% YoY during the year. For 4QFY13, growth in the bottomline was subdued at 3% YoY.

What to expect?

At the current price of Rs 132, the stock is trading at a multiple of 15.7 times our FY15 estimated earnings per share. Exide managed to regain its lost market share in the replacement market towards the end of FY13 which is a positive sign. However, the company has been facing headwinds in terms of pricing as it has not been able to entirely pass on the impact of rising lead costs as the auto industry is also in a downturn. The company's performance has been in line with our estimates for the year. However, with valuations being on the higher side, we have a 'Sell' view on the stock.

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