Hold Exide Industries; target of Rs 138: BP Equities

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Hold Exide Industries; target of Rs 138: BP Equities

BP Equities has maintained hold rating on Exide Industries with a target of Rs 138 in its January 24, 2012 research report.

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BP Equities has maintained hold rating on Exide Industries with a target of Rs 138 in its January 24, 2012 research report.

"In Q3FY12, Exide Industries (Exide) reported 19% YoY increase in sales to Rs 12,502 mn which was inline with our estimates of Rs 12,144 mn. On a sequential basis, revenue increased by 6.3% in Q3FY12. On a sequential basis, Exide reported strong improvement in margins as lead prices declined during the quarter partially offset by depreciation in rupee. In Q3FY12, EBITDA margin stood at 13.2%, up by 560bps QoQ, however fell by 200bps YoY. Employees cost and other expenses as a percentage of sales remained stable however, raw material expenses as a percentage of sales declined sequentially by ~500bps to 67.4% in Q3FY12. Adjusted Net profit jumped by whopping 103.9% QoQ to Rs 1,043 mn which was slightly above our estimates of Rs 938 mn during the quarter. Adjusted net profit margin increased by 400bps QoQ to 8.3% in Q3FY12. During the quarter, the company entered into an agreement with Eastern Penn Manufacturing Co. Inc, USA for getting technical assistance."

"Sales increased by 19% YoY (+6.3% QoQ) on the back of ~20% volume growth in 2-Wheeler batteries segment partially offset by lackluster demand from other Automotive segment. In addition, revenues from Industrial segment increased by 13%, primarily led by volume growth in invertors batteries. However, demand scenario in telecom batteries segment remained sluggish during the quarter. EBITDA margin expanded by ~560bps QoQ to 13.2% on the back of decline in lead prices and improvement in replacement demand which has very high margins compared with OEM segment. Moreover, higher contribution from invertors batteries segment supported the operating performance of Industrial segment in the scenario of weak telecom batteries demand. We expect margins to improve sequentially on the back of increasing replacement demand and higher captive consumption from smelters."

"The company has shown better than expected improvement in margins and therefore, we have upgraded our EPS estimates slightly for FY12 and FY13. However, the stock has appreciated very sharply during the quarter. The stock is currently trading at FY13 P/E multiple of 13.8x (excluding valuation of Insurance and smelting businesses) as per our earnings estimates. We have given a target PE multiple of 15x to value its core battery business and arrived at a target price of Rs 126 per share. We have given a target price of Rs 7 and Rs 5 to its insurance business and smelters respectively and arrived at SOTP based target price of Rs 138 per share," says BP Equities research report.

Non-Institutions holding more than 90% in Indian cos

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