April 27, 2009
1
4QFY2009 Result Update
Exide Industries



BUY

Price
Rs54
Target Price
Rs61
Investment Period
12 months
Stock Info
Sector
Auto Ancillary
Market Cap (Rs cr)
4,300
Beta
0.5
52 WK High / Low
81/34
Avg Daily Volume
158084
Face Value (Rs)
1
BSE Sensex
11,372
Nifty
3,470
BSE Code
500086
NSE Code
EXIDEIND
Reuters Code
EXID.BO
Bloomberg Code
CHLR@IN
Shareholding Pattern (%)
Promoters
48.9
MF/Banks/Indian FIs
32.2
FII/ NRIs/ OCBs
8.1
Indian Public
10.8


Abs.
3m
1yr
3yr
Sensex (%)
26.3
(33.6)
(3.9)
Exide Ind (%)
26.0
(26.5)
101.5













„ Net Sales flat, Net Profit up 8.6%: Exide Industries, India’s largest Auto
Battery manufacturer, for 4QFY2009 clocked 0.5% yoy growth in Net Sales
to Rs799.5cr, which was largely in line with our estimate of Rs800cr, aided
by 18% Total Volume growth during the quarter. According to the company,
both its OE and Replacement sales improved in the fourth quarter compared
with the previous (3QFY2009) quarter. While OE sales increased by 10%,
Replacement sales moved up by almost 20%. However, as against
4QFY2008, OE demand was lower by 2% and there was a marginal growth
in Replacement sales. In the Industrial Segment, domestic Volume demand
increased 40% yoy. The company’s Bottom-line growth at 8.6% yoy to
Rs68.2cr, however, came in slightly above our estimate of Rs63.7cr.

„ Lower input cost helped improve Margins: During 4QFY2009, Exide
witnessed a 212bp yoy increase in EBITDA Margins owing to a 487bp yoy
fall in Raw Material costs, which accounted for around 64.7% of Sales
(68.5% in 4QFY2008). During the quarter, average lead prices fell on a qoq
basis by 4% to $1,221/tonne, while yoy average lead prices declined by
almost 58% from $2,900/tonne levels in 4QFY2008. However, benefits
arising from softening lead prices in the international market, to some extent,
was neutralised by the sharp depreciation of the Rupee against the Dollar.
Exide incurred Net Exchange loss of Rs14.7cr (as against Net Exchange
gain of Rs1cr in 4QFY2008) on Raw Material during the quarter. However,
the 241bp jump in Other expenditure and Staff cost together restricted
higher growth in OPM, wherein Operating Profits during the quarter
increased by 15% yoy.


„ Bottom-line up 8.6%: The company reported 8.6% yoy increase in Net
Profit to Rs68.2cr. Interest cost fell 9.8% yoy to Rs11.4cr including the
Exchange loss of Rs2.7cr. However, higher Depreciation of Rs17.9cr
(Rs15.6cr) restricted Bottom-line growth. Exide’s Net Profit Margins
improved by 62bp yoy. If forex losses arising from Rupee depreciation are
excluded, Profit grew 34% yoy during the quarter.


Key Financials
Y/E March (Rs cr)
FY2008
FY2009
FY2010E
FY2011E
Net Sales
2,850.3
3,397.4
3,211.0
3,678.2
% chg
36.8
19.2
(5.5)
14.5
Net Profit
250.4
284.4
356.9
417.8
% chg
64.6
13.6
25.5
17.0
OPM (%)
16.7
16.2
19.6
19.9
EPS (Rs)
3.1
3.6
4.5
5.2
P/E (x)
17.3
15.2
12.1
10.3
P/BV (x)
4.4
3.5
2.8
2.3
RoE (%)
25.3
23.0
23.1
21.9
RoCE (%)
29.6
29.4
28.8
28.5
EV/Sales (x)
1.6
1.4
1.4
1.2
EV/EBITDA (x)
9.8
8.4
7.1
6.2
Source: Company, Angel Research




Vaishali Jajoo
Tel: 022 – 4040 3800 Ext: 344
e-mail: vaishali.jajoo@angeltrade.com
Performance Highlights

April 27, 2009

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Exide Industries





















































Key Business Highlights

• FY2009 Financial Performance: For FY2009, the company reported 19.2% yoy jump
in Net Sales to Rs3,397.4cr. Bottom-line however, posted lower growth of 13.6% yoy
to Rs284.4cr owing to the substantially high raw material costs in 1HFY2009.
However, Exide Industry’s performance was better the other ancillary companies
during the year, as its Revenue not only depends on the Automobile industry, but it
also derives almost 35% of its Revenues from industrial battery segments like
telecom, power, traction, inverter, UPS, etc. Consistent growth in the Replacement
Automotive Battery Segment also helped post a better performance during the year.
The company declared final dividend of 20% (Rs0.2 per share) in addition to the 40%
dividend (Rs0.4 per share) announced earlier in the year. With this, total dividend for
FY2009 was 60% (Rs0.6 per share) resulting in 1.1% yield at the current market price.

• Lead smelter acquisitions: During FY2009, Exide acquired 51% shareholding in
Leadage Alloys India, a lead smelter, at a total investment of Rs33.4cr to augment
availability of indigenous raw materials. We believe this will facilitate the company in
recycling scrap batteries collected under the Batteries (Management and Handling)
Rules, 2001. The acquisition had come on the heels of its buy-out of another unlisted
lead-smelting company, Tandon Metals, in October 2007 for Rs25cr.

Since the global lead prices have been extremely volatile, the two acquisitions are
expected to help Exide increase its use of recycled lead and lead alloys for making
storage batteries. This would, in turn, reduce the company's dependence on imported
lead - the principal raw material for storage batteries. Exide may go in for expansion of
its lead smelting capacity during the year to meet its increased lead requirement from
captive sources. A proposal in this regard may be placed before the Board. The
company’s two smelters contributed 28% of its lead and lead alloy requirements
during FY2009.

•
Industry Outlook: Battery demand is expected to remain decent on the back of a
strong base and moderate growth in the Auto Battery Replacement market. Better
performance by the Industrial Segment, especially in the Telecom, Railway and Power
Segments, also works in favour of the company. We expect demand for Auto Batteries
(contributes almost 65% of Exide’s Profit) to grow at 7-8% pa. while the Industrial
Battery Segment is expected to register higher 15-16% growth pa. in FY2010. We
estimate Margins of the Industrial Battery Segment to be under pressure as the global
Industrial Battery market shrunk by 40% while the large manufacturers in the West are
also closing down their operations.

• Price reduction: Following the significant reduction in lead prices, the company
slashed the prices of automotive batteries by 5% in 4QFY2009. This was over and
above the 7% price cut in 3QFY2009.

• Capex to meet long-term demand and improve company’s market reach: Exide
plans to double its Industrial Battery capacity and increase its Automobile Battery
capacity by 50% at an investment of Rs450cr over FY2008-10E. It has been operating
at over 90% capacity utilisation since the last five years and has steadily improved its
fixed Asset Turnover ratio from 1.2x in FY2002 to 2.9x in FY2008. For FY2009, the
company’s Capital expenditure was Rs160cr.



April 27, 2009

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• Stable Fundamentals: We estimate the company to clock 12% CAGR in volumes
over FY2009-11E. However, Topline and Bottomline are estimated to grow at 4% and
21.5% CAGR respectively, in the mentioned period. We envisage prices of its main
raw materials to decline by 30% and 1% in FY2010E and FY2011E respectively, and
will be gradually passed on to customers. We believe Revenue growth will be largely
driven by increasing contribution from the high-margin Industrial Segment and
Replacement market in the Automobile Sector. We estimate the company’s OPMs to
improve going ahead. The company’s Operating Cost to Sales ratio is expected to
decline, with the company targeting to achieve higher operational efficiencies through
its R&D efforts and increasing usage of recycled lead in batteries.

Further, while Exide’s working capital requirements have increased in recent times
due to high the raw material prices and the company expects its working capital gap to
go up from Rs165cr in FY2007 to Rs449cr in FY2009, going ahead however, it is
expected to decline as the raw material prices have started cooling off. Further,
Exide's strong brand image has been creating value along with continuously improving
its RoC due to better Asset Turnover on incremental capacities. Further, we believe on
the back of superior pricing power and declining input cost, Exide will continue to
achieve higher Return Ratios and Margins.

Outlook and Valuation

Exide’s prospects are dependent on the fortunes of the Auto and Industrial Segments.
Lately, the Auto Sector Earnings have been under pressure due to sluggish demand.
However, Exide managed a better showing on the back of higher growth in the Industrial
Segment and better Replacement demand on an increased base of OE sales in the last
4-5 years. Lower reliance on imported raw materials coupled with an improved Sales mix
enabled the company to fully negate the adverse impact of a significant reduction in
offtake from customers in the Automobile Segment. We believe that a strong Balance
Sheet and lower Debt-Equity ratio will enable the company sustain strong Cashflows and
meet the challenges arising from lower buoyancy in the Auto market in the near term.

We estimate the company to clock EPS of Rs4.5 and Rs5.2 in FY2010E and FY2011E,
respectively. At the CMP, the stock is quoting at 12.1x and 10.3x FY2010E and FY2011E
Earnings, respectively. We have valued its stake in ING Vysya Life Insurance at
Rs11/share on lower FY2010E New Business Arrived Profit (NBAP). At adjusted
valuations of 9.6x and 8.1x FY2010E and FY2011E Earnings for its core business
respectively, the stock is available at attractive valuations. We maintain a Buy on the
stock, with a Target Price of Rs61.

Exhibit 1: 4QFY2009 Performance
Y/E Mar (Rs cr)
4QFY2009
4QFY2008 % chg
FY2009
FY2008 % chg
Net Sales
799.5
795.6
0.5
3,397.4
2,850.3
19.2
Other Income
1.6
0.8
111.7
2.1
1.2
77.6
Total Income
801.1
796.4
0.6
3,399.5
2,851.5
19.2
EBITDA
134.1
116.6
15.0
549.2
474.9
15.6
OPM (%)
16.8
14.7

16.2
16.7

Interest
11.4
12.6

47.9
37.4

Depreciation
17.9
15.6
14.6
67.9
64.2
5.8
Profit Before Tax
106.5
89.1
19.4
435.4
374.4
16.3
Tax
38.3
26.3

151.0
124.0

Profit After Tax
68.2
62.8
8.6
284.4
250.4
13.6
EPS (Rs)
0.9
0.8

3.6
3.1

Source: Company, Angel Research


April 27, 2009

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Auto Ancillary
Exide Industries




























Research Team: Tel: 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com

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