LKP Research's report on Exide Industries
Exide is the largest manufacturer of lead-acid batteries in India. It is the market leader in the automotive battery industry with market share of >60% in the OEMs and a formidable market share of close to 45% on the replacement side. It is a dominant player in the industrial battery space mainly in the inverters, traction and power domains. With an automotive capacity of 39.9 mn and industrial battery capacity of 3,336 MAh used across Power, Telecom, railways, defence etc Exide stands as a proxy to the automotive and industrial segments within the country. We believe Exide enjoys a competitive advantage over its rivals thanks to its scale, the strength of its brand, its technology tie-ups with global battery producers, and its extensive domestic distribution network.
Exide is all set to forget the past and move ahead with positive developments within and outside the company. Improving client interface, distribution, customer centric approach, launch of new products including for hybrid vehicles and Electric Vehicles, reduction in prices are all heading towards gaining back of market share. Exide’s stock price as a result of its competitive weakness earlier has underperformed the auto ancillary industry over the past 6-7 years. As a result of this, the valuations of the stock have never looked stretched. We therefore value the company at 19x times FY19E earnings and Exide Life Insurance valued at ₹41 which entails 2x FY19E Embedded value/share. Maintain BUY with a target price of ₹ 266 per share.