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Exide has limited upside potential

Exide Industries posted Q4FY12 results, with revenue growth of 18% y-o-y while Ebitda growth was flat on a y-o-y basis.

Exide Industries posted Q4FY12 results, with revenue growth of 18% y-o-y while Ebitda growth was flat on a y-o-y basis. The revenue growth was in line with expectations but Ebitda was 14% below expectations as automotive margins slipped 150 bps sequentially. Exide has a strong battery franchise, but we remain EW (equal-weight) as we believe the valuation on an earnings recovery, assuming 18% top-line growth and further 150 bps margin expansion, leaves limited upside potential.

Ebitda margin improves sequentially, although pace of recovery is slower than expected.

Overall, Ebitda margin came in at 14.7%, up 150 bp q-o-q but below our expectation of a 17% margin. On the automotive side, sales volume in the four-wheeler space was up 6.6% yoy and in two-wheeler space was up 26% yoy.

However, due to lower realisation from OEMs, the Ebitda margin for the segment declined from 14.8% in Q3 to 13.3% in Q4. Industrial volume was up 15% yoy on strong invertor sales, and operating margins came in at 15%, up 390 bps qoq.

Consolidated FY12 net income was R660 crore, up 6% y-o-y. Losses from associates narrowed from R35 crore in FY11 to R15.6 crore in FY12. According to the management, 1) On a blended basis, the price cut in March was 2%, and was mainly done to bring prices closer to the competitions?. 2) The company targets 16-18% margin for FY13.

3) Exide gained some market share in the replacement space in FY12, and expects the trend to continue.

Morgan Stanley

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First published on: 08-05-2012 at 01:17 IST
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