Exide Industries share price edged higher intraday on September 6 continuing with the momentum as the stock price rallied over 21 percent in the last seven days.
The stock has been in focus after HDFC Life on September 3 said it would acquire Exide Life Insurance for Rs 6,687 crore. Exide Life will be subsequently merged into HDFC Life.
"HDFC Life will acquire 100 percent stake in Exide Life Insurance from Exide Industries via issuance of 8,70,22,222 shares at an issue price of Rs 685 per share and a cash payout of Rs 726 crore aggregating to Rs 6,687 crore," the company said in a statement.
The stock was trading at Rs 191.00, up Rs 1.45, or 0.76 percent. It has touched an intraday high of Rs 193.65 and an intraday low of Rs 185.05.
Nomura has a "buy" call on the stock with the target at Rs 223 per share, an upside of 16 percent from the current level. It is of the view that valuation at Rs 79 per share for Exide Life implies a significant premium, adding transaction implies the company's EV/EBITDA of 3.5x on FY23E is quite attractive.
Citi has maintained a "buy" call on the stock and has raised the target to Rs 260 a share, an upside of 36 percent from the current level. "Sale of life insuranec business removes an overhang from valuation’s perspective. At 2.5x FY21 embedded value, valuation received is attractive. We maintain the company as a top auto ancillary pick and raise target multiple to 21x from 18x.
Investec also has a "buy" on the stock with the target at Rs 220 a share, an upside of 15 percent from the current market price. It is of the view that divestment of Exide Life is done at a good valuation and investment in the non-related life insurance business was a sticking point.
The issue seems to be now resolved and should lead to significant re-rating. Implied valuation of Exide’s core battery business is 9x against Amara Raja Batteries at 15x, it said.
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UBS has also retained a "buy" call and has raised the target to Rs 240 per share, an upside of 25 percent from CMP. "The deal values Exide Life at Rs79 per share, much above the target price of Rs 30 per share.
"The company is enhancing shareholder value; Lithium-ion manufacturing to be capex intensive. Reducing target multiple for battery business to 16x (from 18x)," it said.
Domestic brokerge firm Motilal Oswal has maintained its buy call on the stock with the target of Rs 235 per share, an upside of 24 percent from the current level. It is of the view that the stake sale boosts Exide's balance sheet considerably, with over Rs 6,000 crore worth of stake in HDFC Life now available at its disposal. With Exide possibly looking to invest in lithium-ion cell manufacturing under the PLI scheme, this monetisation of the insurance business could not have come at a better time, it said.
"We prefer Exide within the lead acid battery segment as it offers a superior risk-reward considering its market leadership, technological alliances, and sizable war chest available for the foray into New Energy," it said. The stock trades at around 18.4/14.7x FY22E/FY23E EPS. It maintains buy, with the target of Rs 235.
Disclosure: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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