EXIDE INDUSTRIES CMP Rs 63.70
Equity = Rs 80 Cr Market Cap = Rs 5104 Cr Face value=Re.1 Book Value=Rs.15.20 Debt/Eq = 0.35
Exide Industries is the largest manufacturer of lead acid storage batteries in India with 25% revenue share. It dominates the branded automotive battery market with over 72% market share and the industrial battery market with nearly 45% market share. Exide has manufacturing presence in India, Sri Lanka, UK, Singapore and Australia. It also has 50% stake in ING Vysya Life Insurance Co.
Demand for batteries going up:-
Exide is a key beneficiary of the rising demand for branded lead acid batteries, driven by stricter rules on lead usage -
- India being a power-deficient country, load-sheddings and shut-downs are a regular phenomenon in metro cities also. Demand for batteries is being driven up by increased usage of invertors in India.
- Auto sales are on the rise and players like Maruti have posted AllTimeHigh sales in India when even General Motors is failing in USA, car and two-wheeler market here is still in demand because of less impact of slowdown on Indian economy than rest of the world. This rise in demand can benefit Exide also as many other battery makers. Exide is seeing improvement in demand from auto OEMs, it is a key long-term positive since higher OEM sales will eventually translate to higher replacement sales also because customers tend to largely replace worn-out batteries with the same brand which is pre-fitted in the vehicle.
For the year ended March 2009, Exide has reported a 19% growth in net sales to Rs. 3393 Cr, mainly driven by the volume growth in replacement segment. PAT for the company stood 13% higher at Rs.284Cr for FY09 Vs Rs. 250Cr last year.
Lead constitutes about 65% of the manufacturing cost of the company. Exide Industries had recently acquired two lead smelting plants (Tandon Metals and Leadage Alloys) which now contribute 28% of total lead requirement for the company. Nearly 10% appreciation in Rupee may help Exide reduce its Raw Material cost somewhat and positively impact margins.
Heard on the Street:-
Automobile battery manufacturers such as Amara Raja, Exide Batteries, Eveready Industries and Indocel Technologies are firming up plans to set up lithium battery manufacturing plants in the country. Lithium batteries are the latest in electric vehicle technology. These environment-friendly batteries take less time to charge and offer longer driving range than conventional lead-acid batteries. Domestic battery majors which do not have lithium technology patents are planning to set up manufacturing plants either by picking up stakes in or entering into joint ventures with foreign players. Even Exide Industries, being the largest automobile battery manufacturer in the country, may enter the lithium battery space which can creat a separate revenue stream for the company.
Exide Investment of 50% shareholding of ING Vysya Life Insurance Company Limited for Rs.231crs in 2005 is valued from Rs.10 to Rs. 15 by different analysts. And for the past 2 days there has been activity in holding companies of insurance - MAX planning to offload 23% stake for Rs.3000 Crs and Aditya Birla Nuvo Ltd issuing warrant has given rise to hopes of insurance bill getting passed in current budget session. In Stock market knowing the downside is more important, reward will automatically come. Even without the insurance stake the company is a value buy for long term investor and Insurance will add more value.
The stock is trading in a broadening triangle and is now near support. Buy in the range Rs 59-64 for handsome long-term returns. Even Rs 85-90 looks possible on this stock in 1-2 year timeframe.
View Latest reports on Exide Industries:- http://www.scribd.com/share/upload/12881731/2ic64glzvvos5ifbp1dj