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Exide Ind.: Subdued 4Q, better FY15 - Views on News from Equitymaster
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Exide Ind.: Subdued 4Q, better FY15
May 6, 2015

Exide Industries has announced its March 2015 quarter results. The company has reported a 2.3% YoY and 4.2% YoY growth in topline and net profits respectively. Here is our analysis of the results.

Performance summary
  • Exide Industries reports a 2.3% YoY growth in topline during the quarter largely led by growth in replacement volumes and inverters.
  • Operating margins improve by 0.8% to 14.4% resulting in the 9% YoY growth in operating profits.
  • Bottomline growth for the quarter is lower at 4% YoY on account of the reduction in other income.

Standalone financial snapshot
(Rs m) 4QFY14 4QFY15 Change FY14 FY15 Change
Net Sales 16,153 16,518 2.3% 59,750 68,837 15.2%
Expenditure 13,964 14,137 1.2% 51,497 59,665 15.9%
Operating profit (EBITDA) 2,189 2,382 8.8% 8,253 9,172 11.1%
Operating profit margin (%) 13.6% 14.4%   13.8% 13.3%  
Other income 98 57 -42.3% 246 225 -8.6%
Depreciation 326 391 20.0% 1,256 1,395 11.1%
Interest 0 3   12 17 40.3%
Profit before tax 1,961 2,045 4.3% 7,231 7,985 10.4%
Tax 640 669 4.5% 2,360 2,526 7.0%
Profit after tax/(loss) 1,321 1,376 4.2% 4,871 5,459 12.1%
Net profit margin (%) 8.2% 8.3%   8.2% 7.9%  
No. of shares (m)       850.0 850.0  
Diluted earnings per share (Rs)*         6.4  
P/E ratio (x)*         24.1  
* On a trailing 12-months basis

What has driven performance in FY15?
  • Exide Industries reported revenue growth of 15.2% YoY during the year. In the auto segment, growth was largely driven by replacement volumes as OEM volumes continued to remain tepid. In the industrial segment, inverters did well as did the telecom segment.

  • On the margins front, the company witnessed a contraction to the tune of 0.5% YoY during the year to 13.3%. This was on account of a rise in raw material and staff costs (as percentage of sales). For the fourth quarter, however, margins improved by 0.8% to 14.4%. This was attributed to benign lead prices, cost reduction activities started in 3Q and a better product mix i.e. replacement segment and industrial inverters reported good growth.

  • For the full year, bottomline grew in tandem with operating profits at 12% YoY.
What to expect?
At the current price of around Rs 155, the stock trades at around 14.4 times our projected FY17 earnings per share. We expect Exide's growth to ramp up when 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. The company has outlined a capex of Rs 8 bn for FY16, which will largely be towards technology upgradation and capacity expansion. Besides this, focus areas will be increasing the contribution from the telecom segment as well as improving margins to around 15% over the next couple of years. Despite the correction, current valuations do not leave room for much upside. Consequently, our view is that investors not buy the stock at the current price levels.

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