Exide Industries 3QFY2014 performance highlights and results update
January 21, 2014, Tuesday, 11:06 GMT | 06:06 EST | 15:36 IST | 18:06 SGT
Exide Industries’ (EXID) 3QFY2014 results significantly missed our as well as consensus estimates on the operating as well as the bottom-line front. This is due to a steep decline in industrial battery volumes (down ~37% yoy) and sluggish demand in the auto OEM segment (down ~8% yoy) which resulted in low capacity utilization levels for the company. We expect the industrial battery business to remain under pressure in the near term due to expected strong power availability in the country and the approaching election season during which the government generally ensures adequate power supply. We lower our FY2014E/ 15E earnings estimate by ~17% each to factor in the ongoing slowdown in the industrial and replacement battery segments. We recommend a Neutral rating on the stock.
Operating performance disappoints again: For 3QFY2014, EXID’s net sales declined 10.9% yoy (8.9% qoq) to Rs.1,304cr, coming in sharply lower than our expectation of Rs.1,500cr, due to continued slowdown in the automotive OEM and industrial battery segments. The growth in the automotive replacement segment was however flat, as growth in the passenger vehicle segment was marginal, while the commercial vehicle segment witnessed de-growth during the quarter. The EBITDA margin declined 312bp qoq to 10.9% (against our expectation of 14.5%) due to higher marketing spends (~Rs.20cr higher) and low capacity utilization. Led by a weak operating performance, the net profit declined 25.5% yoy (34.7% qoq) to Rs.78cr, substantially lower than our estimate of Rs.134cr.
Outlook and valuation: At Rs.101, the stock is trading at 14.9x FY2015E earnings. We recommend a Neutral rating on the stock.