YES Securities' research report on Exide Industries
EXID’s 4QFY22 results were mixed where revenue outperformance continued with ~7% QoQ growth (v/s flat growth expected). However, margins contracted steeply QoQ by ~140bp to 10.2% (est 10.6%, cons 11.6%), led by RM inflation (gross margin contracted ~300bp QoQ to lowest at 28%). Sharp RM inflation in the recent pat has overshadowed the tight cost control with aggregate other operating expense has declined ~170bp/~80bp in 4Q/3Q. We believe RM cost inflation to continue impact gross margins as Lead prices continues to rise ~3.5% so-far in 1QFY23 (v/s ~22% spike in FY22). Over the midterm, EXID’s successful execution on EV battery manufacturing foray (such as 1) lithium-ion battery cell manufacturing through collaboration with SVOLT and 2) Nexcharge -fully automated lithium-ion battery packs and modules manufacturing plant) would act as key growth drivers for future technologies. While EXID’s LAB business is expected to grow 7‐8% CAGR over 3‐5 years, significant EV battery foray is key trigger for the stock. EXID is trading at 13.6/10.5x of FY23/24 EPS (v/s 10‐year LPA of 21.6x).
We estimate Revenue/EBITDA/PAT CAGR of 10%/18.7%/19.3% over FY22‐24E and tweak FY22/23 estimates to factor in for higher RM. Our current estimates do not factor in any significant capex on foray in to EV battery manufacturing. Maintain BUY with TP of Rs189 (11x Mar-24 EPS + 50% holdco discount to HDFC Life stake).
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