Hold Exide Industries Ltd For Target Rs.190 - Emkay Global Financial Services
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Q2 EBITDA misses estimate
Exide’s Q2FY23 revenue grew 13% YoY (3-yr CAGR at 13%) to Rs37.2bn, in sync with our estimates. EBITDA was flat YoY (3-yr CAGR at 4%) at Rs4.1bn, missing our estimate by 4% due to higher other expenses. QoQ, EBITDA margin expanded by 120bps, mainly owing to price increases and lower cost of lead. Factoring-in better revenue, margin and other income assumptions, we increase our FY23-25E EPS by 5- 9%. Despite losing out in the PLI-ACC scheme, EXID plans to set up a lithium-ion cell manufacturing facility, commissioning of which is expected after two years. Any progress on tie-ups with OEMs for battery supplies could provide clarity on Exide’s long-term growth prospects. We retain HOLD, with TP of Rs190 (Rs176 earlier), based on 11x Dec-24E EPS (Sep-24E earlier) and value of HDFC Life stake at Rs48/share. Key downside risks: Lower-than-expected demand in key geographies, increased competitive intensity, and adverse movement in commodity prices/currency rates.
EBITDA misses estimates: Revenue grew 13% YoY (3-yr CAGR at 13%) to Rs37.2bn, in line with our estimates. Company has indicated that demand was upbeat in Automotive for both, the OEM and Replacement segments. Industrials also witnessed healthy growth. EBITDA was flat YoY (3-yr CAGR at 4%) at Rs4.1bn, at a 4% miss on our estimates due to higher other expenses. On a sequential basis, EBITDA margin expanded by 120bps, mainly on price increases and lower cost of lead. Overall, adjusted PAT grew 5% YoY (3-yr CAGR at 1%) to Rs2.5bn, above our estimate due to higher other income. Other income grew 226% to Rs356mn. What we liked: 1) Demand remains buoyant in both, the automotive and industrial segments. 3) Margins to improve ahead, on favorable input costs. What we did not like: Lower margin expansion (20bps QoQ) in Q2 vs Amara Raja Batteries (340bps QoQ).
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