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Exide Ind.: All round growth - Views on News from Equitymaster
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Exide Ind.: All round growth
Dec 19, 2012

Exide Industries announced the second quarter results of financial year 2012-2013 (2QFY13). The company reported a 30% YoY and 135% YoY growth in revenues and net profits respectively. Here is our analysis of the results.

Performance summary
  • Net sales grow by 30% YoY led by healthy growth in the replacement market.
  • Operating margins substantially improve by 4.7% YoY to 12.4% in 2QFY13 largely due to the fall in raw material costs (as a percentage of sales).
  • Strong growth in operating profits coupled with higher other income lead to the robust 135% YoY growth in the bottomline.

Standalone financial snapshot
(Rs m) 2QFY12 2QFY13 Change 1HFY12 1HFY13 Change
Net Sales 11,727 15,214 29.7% 24,170 30,749 27.2%
Expenditure 10,827 13,331 23.1% 21,045 26,540 26.1%
Operating profit (EBITDA) 900 1,882 109.1% 3,126 4,210 34.7%
Operating profit margin (%) 7.7% 12.4%   12.9% 13.7%  
Other income 79 125 58.9% 387 273 -29.5%
Depreciation 247 282 14.2% 484 558 15.3%
Interest 15 10 -32.4% 29 23 -18.5%
Profit before tax 718 1,716 139.0% 3,000 3,901 30.0%
Tax 207 514 148.3% 857 1,179 37.7%
Profit after tax/(loss) 511 1,202 135.2% 2,144 2,722 27.0%
Net profit margin (%) 4.4% 7.9%   8.9% 8.9%  
No. of shares (m)       850.0 850.0  
Diluted earnings per share (Rs)*         6.1  
P/E ratio (x)*         23.3  
(*On a trailing 12-month basis)

What has driven performance in 2QFY13?
  • Exide Industries (Exide) recorded a healthy 30% YoY growth in revenues during 2QFY13. Although demand in the automotive OE segment remained dampened during the quarter due to the ongoing slowdown in the Indian automotive industry, robust growth in the replacement market more than compensated for this. The industrial segment also did well on account of healthy growth in UPS batteries. That said, the next couple of quarters for this segment is likely to be subdued on account of the onset of winter.

    Cost break-up...
    (Rs m) 2QFY12 2QFY13 Change 1HFY12 1HFY13 Change
    Raw materials/ purchases 8,342 10,071 20.7% 16,283 20,185 24.0%
    % of sales 71.1% 66.2%   67.4% 65.6%  
    Employee costs 644 897 39.3% 1,364 1,738 27.4%
    % of sales 5.5% 5.9%   5.6% 5.7%  
    Other expenditure 1,841 2,364 28.4% 3,399 4,618 35.9%
    % of sales 15.7% 15.5%   14.1% 15.0%  

  • Exide's operating profits grew at an impressive rate of 109% YoY during the quarter as costs grew at a slower pace than sales. The company's operating margins substantially improved by 4.7% YoY to 12.4% in 2QFY13 on the back of lower raw material costs and other expenses (as a percentage of sales). Raw material costs fell from 71.1% of sales in 2QFY12 to 66.2% in 2QFY13 and this could be attributed to lead prices softening.

  • Led by the strong growth in operating profits and higher other income, bottomline grew by an impressive 135% YoY. This growth came about despite the surge in tax expenses.

What to expect?
At the current price of Rs 142, the stock is trading at a multiple of 15.6 times our FY15 estimated earnings per share. Going forward, although the company does expect an overall slowdown in the OEM section, it will focus on regaining its lost market share in the replacement market. The company also intends to capitalise on the opportunity in home UPS systems and with this in mind it has decided to augment capacity by setting up another factory near Haridwar in Uttarakhand, the first one being located nearby Roorkee. Despite some few tough quarters in the past, the outlook is expected to improve for Exide Industries going forward. However, because of valuations being on the higher side, we maintain our 'Sell' view on the stock.

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