Neutral Exide Ltd For Target Rs.381 by Motilal Oswal Financial Services Ltd
Earnings beat led by strong growth across segments Pricing action to support margins in the near term
* Exide’s (EXID) 2QFY27 PAT of INR3.9b came in above our est. of INR2.9b. Strong double-digit YoY growth was observed across key segments, which led to 20.3% YoY growth in revenues, beating our expectations.
* The outlook for the lead-acid business remains positive across the auto and industrial segments (excluding telecom). However, we remain cautious about the long-term returns from the lithium-ion business. Moreover, the stock, trading at ~21.3x/19.1x FY27E/28E EPS, appears fairly valued.
* We reiterate our Neutral rating with an SoTP-based TP of INR381. We value the core (lead acid) business at 14x FY28E EPS. We add a value of INR71 per share for the EV business (based on book value) and INR45 per share for its stake in HDFC Life
Highlights from the management commentary
Management remains constructive on lead-acid battery demand, supported by healthy growth across automotive OEM, replacement, solar, inverter, and industrial segments. Both OEM and aftermarket demand are growing concurrently, supporting capacity utilization.
* Automotive OEM growth is expected to moderate to low double digits in 2HFY27, although absolute volumes are expected to remain at elevated levels. Replacement business growth is expected to broadly sustain at H1FY27 levels.
* Management expects the 2W and 4W replacement businesses to sustain healthy growth, supported by an expanding vehicle parc and distribution network. Home inverter and solar businesses remain growth drivers, with solar also benefiting from government initiatives.
* Management expects to maintain EBITDA margins within the 12–12.5% range over the next two quarters, supported by calibrated price increases and cost optimization, subject to lead prices and currency movements.
* The company has undertaken cumulative price increases of over 10% between January and October 2026 to offset input-cost inflation. Further calibrated price hikes will be undertaken as required to protect margins.
* Management expects annual lead-acid capex to remain at INR4-5b, while further equity funding into the lithium-ion subsidiary is likely to continue over the next couple of years to support working capital and the business ramp-up.
* Commercial revenues from the LFP business commenced in Oct’26, while NMC revenues are expected to follow after completion of customer validation. Supplies to major OEMs are expected to commence around Q4FY27, potentially from Feb’27.
Valuation and view
The outlook for the lead-acid business remains positive across the auto and industrial segments (excluding telecom). However, we remain cautious about the long-term returns from the lithium-ion business. Moreover, the stock, trading at ~21.3x/19.1x FY27E/28E EPS, appears fairly valued. We reiterate our Neutral rating with an SoTP-based TP of INR381. We value the core (lead acid) business at 14x FY28E EPS. We add a value of INR71 per share for the EV business (based on book value) and INR45 per share for its stake in HDFC Life.
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