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Valuation and View – Demand outlook stable to positive

EXID’s 3QFY24 results was weak led by lower than expected revenues at Rs38.4b (-6.5% QoQ, est Rs41.9b), led to ~6.5%/5% miss on EBITDA to our/consensus estimates. The growth YoY was led by volumes while pricing remained broadly stable. Gross margins expanded ~40bp QoQ (-80bp YoY) at 31.5% (est 30.8%) surprised positively despite ~14%/~2.3% increase in the lead price in 2Q/3Q. This would partially be offset by favorable mix. The demand outlook is stable to positive for the base business for auto/industrial vertical, as current volume growth is expected to sustain over near-mid term. Further, re-configured products for exports (to avoid anti-dumping) to benefit exports recovery in the near-term. We believe, recent stability in lead prices (+14%/2.3% increase in 2Q/3Q) to influence margins ahead.

Over the mid-long term, EXID’s speedy ramp-up of lithium-ion battery cell manufacturing, would be closely watched as plan is expected to begin commercial production by end of FY25E. While EXID’s LAB business is expected to grow 7-8% CAGR over 3-5 years, significant ramp-up in EV cell manufacturing and order wins to act as key re-rating trigger for the stock. EXID is trading at 19.9x/16.8x FY25/26 S/A EPS (v/s 10-year LPA of ~20x). We cut FY24/25/26 EPS by 7%/4%/3% to factor in for lower revenues and other income. and estimate Revenue/EBITDA/PAT CAGR of 10%/17.6%/21% over FY23-26E. We have maintained BUY with TP of Rs377 (20x Mar-26 EPS + 50% holdco discount to HDFC Life stake at Rs29).

Result Highlight – Below est; weak revenues drives miss on EBITDA

Standalone revenues grew 12.6% YoY (-6.5% QoQ) at ~Rs38.4b (est Rs41.8b, cons Rs39.4b). Co indicated auto volumes were better for OEM and replacement segments while industrial sector continues to see order inflow backed by increased investments in key end user segments.

Gross margins expanded 40bp QoQ (-80bp YoY) at 31.5% (est 30.8%). This should be largely led by favorable product mix as lead prices were higher QoQ by average ~8% to Rs176.7/kg (2 qtr rolling basis). This was partially offset by controlled other expenses.

Consequently, EBITDA grew 9.7% YoY (-9% QoQ) at Rs4.4b (est Rs4.7b, cons Rs4.6) with margins contracted 30bp YoY (-30bp QoQ) at 11.5% (est 11.2%, cons 11.7%).

Led by moderate EBITDA growth and lower other income at Rs227m (-42% QoQ, est Rs400m), Adj.PAT grew 7.7% YoY (+16.3% QoQ) at Rs2.4b (est Rs2.78b, cons Rs2.7b).

9MFY24 performance – Revenue/EBITDA/Adj.PAT grew 9%/12.9%/10.6%.

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