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					                                                                                                     Exide Industries
                                                                                                     4QFY2009 Result Update




BUY                                             Performance Highlights
Price                                 Rs54          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
Target Price                          Rs61          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,
Investment Period               12 months           both its OE and Replacement sales improved in the fourth quarter compared
                                                    with the previous (3QFY2009) quarter. While OE sales increased by 10%,
Stock Info                                          Replacement sales moved up by almost 20%. However, as against
Sector                       Auto Ancillary
                                                    4QFY2008, OE demand was lower by 2% and there was a marginal growth
                                                    in Replacement sales. In the Industrial Segment, domestic Volume demand
Market Cap (Rs cr)                    4,300         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.
Beta                                     0.5
                                                    Lower input cost helped improve Margins: During 4QFY2009, Exide
52 WK High / Low                      81/34
                                                    witnessed a 212bp yoy increase in EBITDA Margins owing to a 487bp yoy
Avg Daily Volume                     158084         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
Face Value (Rs)                            1        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
BSE Sensex                           11,372         arising from softening lead prices in the international market, to some extent,
                                                    was neutralised by the sharp depreciation of the Rupee against the Dollar.
Nifty                                 3,470
                                                    Exide incurred Net Exchange loss of Rs14.7cr (as against Net Exchange
BSE Code                             500086         gain of Rs1cr in 4QFY2008) on Raw Material during the quarter. However,
                                                    the 241bp jump in Other expenditure and Staff cost together restricted
NSE Code                        EXIDEIND            higher growth in OPM, wherein Operating Profits during the quarter
                                                    increased by 15% yoy.
Reuters Code                        EXID.BO

Bloomberg Code                  CHLR@IN
                                                    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
Shareholding Pattern (%)                            Exchange loss of Rs2.7cr. However, higher Depreciation of Rs17.9cr
                                                    (Rs15.6cr) restricted Bottom-line growth. Exide’s Net Profit Margins
Promoters                                           improved by 62bp yoy. If forex losses arising from Rupee depreciation are
                                        48.9
                                                    excluded, Profit grew 34% yoy during the quarter.
MF/Banks/Indian FIs
                                        32.2
FII/ NRIs/ OCBs
                                         8.1     Key Financials
Indian Public
                                        10.8     Y/E March (Rs cr)           FY2008        FY2009         FY2010E       FY2011E
                                                 Net Sales                    2,850.3      3,397.4         3,211.0        3,678.2

Abs.                 3m      1yr         3yr     % chg                             36.8       19.2            (5.5)          14.5
                                                 Net Profit                       250.4      284.4           356.9         417.8
Sensex (%)         26.3    (33.6)       (3.9)
                                                 % chg                             64.6       13.6            25.5           17.0
Exide Ind (%)      26.0    (26.5)     101.5      OPM (%)                           16.7       16.2            19.6           19.9
                                                 EPS (Rs)                           3.1        3.6             4.5            5.2
Vaishali Jajoo                                   P/E (x)                           17.3       15.2            12.1           10.3
                                                 P/BV (x)                           4.4        3.5             2.8            2.3
Tel: 022 – 4040 3800 Ext: 344
e-mail: vaishali.jajoo@angeltrade.com            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



  April 27, 2009                                                                                                                    1
                                                                                 Exide Industries
                                                                                              Auto Ancillary

                 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                                                                                                   2
                                                                                Exide Industries
                                                                                             Auto Ancillary

                 •     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                                                                                                  3
                                                                                                                                                                       Exide Industries
                                                                                                                                                                                              Auto Ancillary




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

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April 27, 2009                                                                                                                                                                                                          4

				
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