To tap the share of unorganised players, Exide is increasingly promoting competitively-priced brands (Dynex and SF Sonic with shorter warranty period).
Exide’s Q4FY18 Revenue, Ebidta and PAT were respectively 7, 11, 11% ahead of our estimates. Net revenue at Rs 24.6bn reflects strong traction in automotive and industrial batteries sales. Ebitda at Rs 3.38bn with margin at 13.7%, topped estimates, led by higher operating leverage. APAT stood at Rs 1.89bn, impacted by higher depreciation and lower other income.
We believe Exide is well placed to take advantage of strong OEM volume and accelerating replacement demand. Exide growth story is premised on: 1) Strong growth in OEMs and replacement segment; 2) capturing market from unorganised players post GST and 3) Strong traction in nascent e-rickshaws/solar segments. However, challenges persist in the form of falling lithium-ion battery cost, higher capex requirement and lacklustre life insurance biz.
We have inched up EPS by 2.2% for FY20E. Expect revenue/EPS CAGR of 14/25% over FY18-20E. Maintain buy with revised SOTP-based TP of `298, based on 20x FY20E EPS + 2x Inv for the insurance business stake.
Automotive batteries, UPS and telecom batteries exhibited strong volume growth in Q4. As per our channel check, Exide has recovered a major chunk of the market share it had lost in the automotive replacement segment, aided by: (1) improvement in after sales service; (2) narrowing the price gap with AMRJ; (3) technological upgrades (using punch grid technology); (4) channel financing support to dealers, and (5) traction in brands like Dynex targeted at the lower value segment.
To tap the share of unorganised players, Exide is increasingly promoting competitively-priced brands (Dynex and SF Sonic with shorter warranty period). We expect the share of unorganised players to reduce from 42% to 30% by FY22. Expect strong growth in the topline for Q1, but higher lead prices will continue to restrict margins.
By: HDFC Securities