Hold Exide Industries; target of Rs 235: ICICI Direct

February 11
18:25 2019

ICICI Direct’s research report on Exide Industries

Exide Industries (EIL) reported a muted Q3FY19 performance Net sales for the quarter were at Rs 2,497 crore, up 9.7% YoY The management commentary suggests volume growth was seen across verticals i.e. automotive, motorcycle, UPS and solar battery EBITDA in Q3FY19 was at Rs 312 crore, up 10.6% YoY with corresponding EBITDA margins at 12.5%, up 10 bps Margin improvement was limited primarily due to higher other expenses. The only silver lining was gross margin expansion of nearly 210 bps on a QoQ basis Lead prices in Q3FY19 were at Rs 143/kg, down 12% YoY & 4% QoQ Consequent PAT for the quarter came in at Rs 155 crore, up 7.8% YoY.


However, the company will bear the brunt of muted auto sales outlook thereby limiting its growth prospects the consequent valuation multiples. Going forward, over FY18-20E, we expect sales & PAT to grow at a CAGR of 10.4% & 11.2%, respectively. We value EIL at Rs 235 on SOTP basis; Rs 195 i.e. 20x FY20E EPS of Rs 9.8/share (base business) + Rs 36 i.e. 1.2x embedded value of insurance business + Rs 4 i.e. 3.3x P/BV on smelting business. We assign HOLD recommendation.

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