Exide: What’s on the cards? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Exide: What’s on the cards?

Oct 3, 2001

The slowdown in auto demand has had a significant impact on profitability of auto ancillary manufacturers. Though Exide, the market leader in the automotive battery segment, reported a decent growth in sales in 1QFY02, profits fell sharply. Given the recent upturn in auto volumes, what can one expect from the company? Exide Industries is India’s largest storage battery company. It sells both automotive and industrial batteries and the sales mix is in the ratio of 60:40. It has a technology tie up with Shin Kobe Electric Machinery Co Ltd. for industrial batteries and The Furukawa Battery Co. for automotive batteries.

Exide dominates the Indian battery market. For the automotive segment, the company had a market share of 90% in the original equipment market and a 63% market share in the replacement market. It supplies batteries to almost all the major auto companies like Telco, M&M and Ashok Leyland.

However, Exide is having a tough time on the replacement market front. With India coming under WTO purview, cheaper imports from China, Korea and Bangladesh have flooded the domestic markets. Since margins are higher in the replacement market (due to a better pricing power), availability of cheaper substitutes is a cause of concern. But after representations from the industry, the government of India has declared an anti-dumping duty on these imports. But this is expected to be safeguard domestic manufacturers only in the short run.

On a positive note, the company’s new customers like Hyundai, Honda and Toyota have reported commendable increase in volumes in 1QFY02. These companies have also launched new models in 1HFY02 (Hyundai Sonata and Honda Accord), which augurs well for the Exide. The two-wheeler battery demand grew by 21% in FY01 on the back of a sharp rise in motorcycle volumes thanks to new launches from Hero Honda and Bajaj Auto (Exide supplies batteries to both these companies). With the motorcycle segment growing at a CAGR of 25%, buoyancy in two-wheeler battery demand is expected to continue in the coming years also.

Though the company reported a healthy 11% rise in sales in 1QFY02, margins fell by 300 basis points. Extraordinary item on account of provisioning for voluntary retirement scheme also subdued profit growth. Net profits for 1QFY02 fell sharply by 48% to Rs 36 m. Though volumes are expected to increase, margins might continue to remain under pressure for the rest of the year.

To capture the replacement market, it has launched a website where customers can order for batteries and be delivered at their doorsteps. It also enables dealers to track orders and help release the capital locked in inventory. But this initiative is expected to succeed only in the long run.

The scrip is currently trading at Rs 44 at a P/E multiple of 11x annualised 1QFY02 earnings. The auto sector continues to reel under pressure due to slowing economy and slow progress on the reforms. Though volumes have increased in recent weeks, it remains to be seen whether it sustains in the second half of the year. The industrial battery demand has also remained sluggish in absence of fresh investments. Against this backdrop prospects in the current year do not sound promising.

Equitymaster requests your view! Post a comment on "Exide: What’s on the cards?". Click here!


More Views on News

EXIDE INDUSTRIES Announces Quarterly Results (3QFY21); Net Profit Up 23.2% (Quarterly Result Update)

Feb 1, 2021 | Updated on Feb 1, 2021

For the quarter ended December 2020, EXIDE INDUSTRIES has posted a net profit of Rs 2 bn (up 23.2% YoY). Sales on the other hand came in at Rs 28 bn (up 16.2% YoY). Read on for a complete analysis of EXIDE INDUSTRIES's quarterly results.

EXIDE INDUSTRIES 2019-20 Annual Report Analysis (Annual Result Update)

Nov 6, 2020 | Updated on Nov 6, 2020

Here's an analysis of the annual report of EXIDE INDUSTRIES for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of EXIDE INDUSTRIES. Also includes updates on the valuation of EXIDE INDUSTRIES.

EXIDE INDUSTRIES Announces Quarterly Results (1QFY21); Net Profit Down 80.4% (Quarterly Result Update)

Aug 24, 2020 | Updated on Aug 24, 2020

For the quarter ended June 2020, EXIDE INDUSTRIES has posted a net profit of Rs 440 m (down 80.4% YoY). Sales on the other hand came in at Rs 15 bn (down 44.3% YoY). Read on for a complete analysis of EXIDE INDUSTRIES's quarterly results.

What's Behind Tata Motors' Hike in Car and UV Prices? (Views On News)

May 10, 2021

Tata Motors' plan to tackle rise in its raw material prices.

Hero MotoCorp Q4 Net Profit Jumps Over 40% On Strong Operating Performance (Views On News)

May 7, 2021

The company's EBITDA jumped 78.8% YoY on account of cost saving initiatives to offset higher commodity prices and input costs.

More Views on News

Most Popular

My Secret to Find Breakthrough Stocks (Fast Profits Daily)

May 7, 2021

I've used this trading technique for many years with great success. I'm sharing it with you today.

Are the Stock Markets Deaf to Covid Agony? (Profit Hunter)

May 6, 2021

Why are markets discounting the economic impact of Covid?

The Worst Sector in the Market (Fast Profits Daily)

May 11, 2021

The worst sector in the stock market according to the charts.

The Key to Profit from India's EV Revolution (Profit Hunter)

May 7, 2021

Stocks you must consider investing in before buying your first electric vehicle.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


May 14, 2021 (Close)


  • Track your investment in EXIDE INDUSTRIES with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks