PL Stock Report: Exide Industries (EXID IN) - Q2FY24 Result Update – In-line results; volumes to drive performance - Accumulate

Exide Industries (EXID IN) - Himanshu Singh - Research Analyst, Prabhudas Lilladher Pvt Ltd.

Rating: ACCUMULATE | CMP: Rs266 | TP: Rs295

Q2FY24 Result Update – In-line results; volumes to drive performance

Quick Pointers:

• Volume driven growth to continue.
• Lithium-ion cell plant on-track to start production by FY25 end.

Exide Industries’ (EXID) 2QFY24 revenue and EBITDA was largely in-line with our estimates, while it beat consensus EBITDA estimate. 2Q revenue was flat QoQ but EBITDA margins expanded by ~120bps QoQ driven by better mix, benign input costs, stable pricing, further aided by inventorisation. EXID is seeing growth in both automotive and industrial segment and YoY revenue growth in 2Q was volume driven. Li-ion cell plant is progressing well with homologation process underway, Rs15bn is already spent (out of Rs45bn outlay) & production is likely to start by FY25 end. Company is in talks with customers & sees good demand for li-ion cells that are currently imported.

We believe EXID is poised for medium-term growth led by 1) its robust product expansion, 2) technological investments & 3) industrial segment momentum. Automotive sector is expected to grow using its market dominance, innovative product launches and broader network in domestic & export markets. Furthermore, Industrial sector will gain from rising demand driven by public/private capex along with growth in renewable energy and infrastructure projects. We keep our estimates unchanged and retain ‘Accumulate’ rating with SoTP of Rs.295 at 15x Sep-2025 EPS (unchanged).

• Largely in-line revenue and margin: EXID’s Q2FY24 revenue grew by 10.4% YoY to Rs. 41bn and was in line with PLe, while beat Bloomberg consensus (BBGe) by 1.2%. EBITDA at Rs. 4.8bn grew by 17.1% YoY and beat BBGe by 6.6%. EBITDA margin rose by 67bps YoY to 11.8%, in line with PLe and beat on BBGe (11.2%). PAT was in line with our estimates and was beat on BBGe.
• Key takeaways: (1) Lead-acid battery continues to show robust growth across industrial (including telecom, solar, UPS, the power sector) and automotive segment. After-market battery demand is expected to increase as it has a replacement cycle of about three years after vehicle sales, as the vehicle demand have picked up over the last few years, Exide expects uptick in the replacement demand going ahead. Overall lead-acid capacity utilization is >80% and EXID is continuously reconfiguring the shop floor to de-bottleneck and increase capacity, however, it may see fresh capacity additions in couple of sectors. (2) EXID saw extremely robust growth in the exports segment which it expects to gradually increase over time. Exports accounted for about 9% of total revenue and is expected to increase in future. Exide sells quality products and doesn’t play on costs entirely in the international market. (3) On the lithium cell plant, management noted that progress is as per expectations and has already begun the homologation process for cells. EXID has already invested Rs 15bn in the plant, out of the total Rs 45bn outlay in phase-1. The company plans to fund this without liquidating any of its assets or investments. It expects demand to be strong and capacity ramp-up will be the only challenge given 100 to 200 GwH annual requirement in India compared to 6 GwH capacity it is building in phase-1. (4) EXID noted that lead costs have increased by 4% YoY, which had 2% impact on margins in 2Q. Exide sees improvement in gross margins going ahead as well.