RESULTS REVIEW 2QFY16

28 OCT 2015

Exide Industries
NEUTRAL
INDUSTRY

AUTOS

CMP (as on 28 Oct 2015)

Rs 161

Target Price

Rs 159

Nifty

8,171

Sensex

27,040

KEY STOCK DATA

Bloomberg/Reuters

EXID IN/EXID.BO

No. of Shares (mn)

850

MCap (Rs bn) / ($ mn)

137/2,106

6m avg traded value (Rs mn)

287

STOCK PERFORMANCE (%)

Running on low charge

Exide's 2QFY16 adjusted PAT at Rs 1.56bn (+24% YoY,
+1% QoQ) was in line with expectations. Volume
growth across the auto and industrial segments saw
muted performance. Despite 130bps QoQ gross
margin expansion on account of soft lead prices,
EBITDA margin was flat at 14.8% QoQ due to higher
staff/other expenses.
Exide plans to commence its battery facility with
upgraded technology in 4QFY16. The company also
plans to upgrade all facilities over next two years
which would drive margin improvement by 100bps.

Promoters

45.99

FIs & Local MFs

17.26

FIIs

15.59

Given the muted near-term volume growth outlook,

and the benefits of softer lead prices already being
reflected, a downside risk to current consensus
earnings growth estimates is likely. Softening
replacement demand may lead to a weaker pricing
environment. Our SOTP based TP (16x for core
business + 1x BV for stake in Exide insurance) has
been revised upwards to Rs 159, as we roll forward
to Sept-17E EPS. Maintain NEUTRAL.

Public & Others

21.16

Financial Summary

52 Week high / low

Rs 207/136
3M

6M

12M

Absolute (%)

13.6

(8.6)

3.4

Relative (%)

15.1

(7.3)

2.8

SHAREHOLDING PATTERN (%)

Source : BSE

Navin Matta
navin.matta@hdfcsec.com
+91-22-6171-7322
Sneha Prashant
sneha.prashant@hdfcsec.com
+91-22-6171-7336

(Rs mn)
Net Sales
EBITDA
PAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)

2QFY16
17,390
2,574
1,561
1.8
-

2QFY15
17,628
2,077
1,258
1.5
-

YoY (%)
(1.3)
23.9
24.1
24.1
-

Highlights of the quarter

Slowing replacement market growth: Exides
2QFY16 4W/2W replacement wholesale volume
growth came off sharply at 1%/9% YoY, as dealer
inventory levels had sharply risen in 1Q. The
management expects normalised replacement
demand growth to moderate to ~6-7% YoY as
against 8-9% YoY.
Technology
upgrade
efforts
underway:
Production of the upgraded range of batteries is
likely to commence from 4QFY16 with the 0.8mn
capacity. With reduced lead content, higher
productivity and lower warranty costs (driven by
better quality), Exide expects operating margins to
improve by 100bps over the next two years.
Capex guidance: The company reiterated its
Rs 7bn capex guidance for FY16. Apart from
spends on technology upgrade, Exide plans to
raise 4W/2W capacity from 12.2/22mn to
15.1/26mn by FY17-18.
1QFY16 QoQ (%)
17,995
(3.4)
2,660
(3.2)
1,552
0.6
1.8
0.6
-

FY15
68,742
9,077
5,459
6.4
25.1
14.9
14.0

FY16E
69,839
10,345
6,058
7.1
22.6
13.1
14.3

FY17E
78,448
12,117
7,053
8.3
19.4
11.1
15.1

FY18E
86,954
13,571
7,914
9.3
17.3
9.8
15.3

Source: Company, HDFC sec Inst Research

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

EXIDE INDUSTRIES : RESULTS REVIEW 2QFY16

With the exception of

replacement segment, all key
segments faced volume
decline during the quarter
Auto OEM sales declined by
5% YoY and industrial
volumes were down 4% YoY
Replacement volumes growth
moderated in both the
2W/4W segment to 1%/9%
YoY (vs. 23%/20% YoY in
1QFY16
The management highlighted
that wholesale volume
growth saw a sharp QoQ drop
as dealers had built up higher
than normal level of inventory
in the previous quarter to
compensate for lower inverter
battery offtake
Gross margin improved by
130bps QoQ due to softer
lead prices and cost reduction
efforts by the company

Quarterly Financials Snapshot

(Rs mn)
Net Sales
Material Expenses
Employee Expenses
Other Operating Expenses
EBITDA
Interest Cost
Depreciation
Other Income
Exceptional item
PBT
Tax
APAT
RPAT

2QFY16
17,390
11,220
1,170
2,425
2,574
0
383
84
2,275
715
1,561
1,561

2QFY15
17,628
11,842
1,083
2,626
2,077
4
329
69
1,813
555
1,258
1,258

YoY (%)
(1.3)
(5.2)
8.1
(7.7)
23.9
(97.6)
16.5
23.0
25.5
28.8
24.1
24.1

1QFY16
17,995
11,850
1,111
2,375
2,660
2
368
31
2,321
769
1,552
1,552

QoQ (%)
(3.4)
(5.3)
5.3
2.1
(3.2)
(95.2)
4.3
172.3
(2.0)
(7.0)
0.6
0.6

Source: Company, HDFC sec Inst Research

Margin Analysis
Material Expenses as % of Net Sales
Employee Expenses as % of Net Sales
Other Expenses as % of Net Sales
EBITDA Margin (%)
Tax rate (%)
APAT Margin (%)

2QFY16
64.5
6.7
13.9
14.8
31.4
9.0

2QFY15
67.2
6.1
14.9
11.8
30.6
7.1

YoY (%)
(265)
59
(95)
302
80
184

1QFY16
65.8
6.2
13.2
14.8
33.1
8.6

QoQ (bps)
(133)
56
75
2
(172)
35

Source: Company, HDFC sec Inst Research

EBITDA margin at 14.8% was

flat QoQ as staff/other
expenses saw a considerable
increase on sequential basis

Page | 2

EXIDE INDUSTRIES : RESULTS REVIEW 2QFY16

One-year Forward P/E Chart

P/E*

One-year Forward EV/EBITDA Chart

Avg PER*

+ 1 SD

EV/EBITDA*
+ 1 SD

- 1 SD

35

25

30

20

Avg EV/EBITDA*
- 1 SD

25
20

15

15

10

Source: Company, Bloomberg, HDFC sec Inst Research

* P/E excludes value of Exide Insurance

Oct-15

Oct-14

Oct-13

Oct-12

Oct-11

Oct-10

Oct-09

Oct-08

Oct-07

Oct-05

Oct-15

Oct-14

Oct-13

Oct-12

Oct-11

Oct-10

Oct-09

Oct-08

Oct-07

0
Oct-06

Oct-05

Oct-06

10

Source: Company, Bloomberg, HDFC sec Inst Research

* EV/EBITDA excludes value of Exide Insurance

Change In Estimates
In Rs mn
Net Sales
EBITDA
Adj PAT
Adj EPS (in Rs)

New
FY16E
69,839
10,345
6,058
7.1

FY17E
78,448
12,117
7,053
8.3

Old
FY16E
69,839
10,106
5,934
7.0

FY17E
78,947
12,111
7,078
8.3

% chg
FY16E
2.4
2.1
2.1

FY17E
(0.6)
0.0
(0.4)
(0.4)

Source: HDFC sec Inst Research

SOTP Valuation
Standalone Business
Sept 17E EPS (Rs/sh)
Multiple (x)
Standalone business value (Rs/sh)
Insurance stake value/share (1x BV)
Target Price (Rs/sh)

Value
8.8
16.0
140.9
18.6
159

Source: HDFC sec Inst Research

Page | 3

EXIDE INDUSTRIES : RESULTS REVIEW 2QFY16

Net Sales Growth Muted

Soft Lead Prices Aided In Gross Margin Expansion

Net sales (Rs bn)

% YoY (RHS)

20

Avg lead -1.5m lag (INR/Kg) - RHS

0.25

Gross margin

0.38

132
130
128
126
124
122
120
118
116
114
112

0.2
16

0.15

0.36

0.1

12

0.05
8

0.34

0
-0.05

0.32

-0.1

Source: Company, HDFC sec Inst Research

Source: Company, HDFC sec Inst Research

EBITDA Margin Saw Flattish QoQ Trend

Auto Segment Product Mix Stable

EBITDA (Rs bn)

EBITDA margin (RHS)

4W - Rep/OEM (x)

0.16

2.5

0.14

0.12

1.5

0.1

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

2QFY14

0.3

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

-0.15
2QFY14

2W - Rep/OEM (x) - RHS

1.9

0.6
0.58
0.56
0.54
0.52
0.5
0.48
0.46
0.44
0.42
0.4

1.8

1.7
1.6
1.5
1.4
1.3

0.08

0.5

0.06

1.2

Source: Company, HDFC sec Inst Research

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

1
2QFY14

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

2QFY14

1.1

Source: Company, HDFC sec Inst Research

Page | 4

EXIDE INDUSTRIES : RESULTS REVIEW 2QFY16

Peer Valuations
CMP
(Rs/sh)
Balkrishna Industries
667
Bharat Forge
868
Exide Industries
161
Ramkrishna Forgings
593

Mcap
(Rs bn)
64
202
137
17

TP

Rating

830
1,153
159
714

BUY
BUY
NEU
BUY

Adj EPS (Rs/sh)

FY15 FY16E FY17E
51.5
58.1
57.2
31.1
40.0
48.0
6.4
7.1
8.3
27.2
26.0
37.0

FY15
12.9
27.9
25.1
21.8

P/E (x)
FY16E
11.5
21.7
22.6
22.8

FY17E
11.7
18.1
19.4
16.0

EV/EBITDA (x)
FY15 FY16E FY17E
8.0
6.7
6.0
15.0
12.7
10.5
14.9
13.1
11.1
19.1
12.4
9.2

FY15
23.8
23.6
14.0
18.3

RoE (%)
FY16E
22.0
24.5
14.3
16.7

FY17E
17.9
24.4
15.1
20.3

Source: Company, HDFC sec Inst Research

Page | 5

EXIDE INDUSTRIES : RESULTS REVIEW 2QFY16

Income Statement
(Rs mn)
Net Sales
Growth (%)
Material Expenses
Employee Expenses
SG&A Expenses
Other Operating Expenses
EBIDTA
EBIDTA (%)
EBIDTA Growth (%)
Other Income
Depreciation
EBIT
Interest
PBT
Tax
Adj PAT
APAT Growth (%)
Reported PAT
Adj EPS
Adj EPS Growth (%)

Balance Sheet
FY14
59,642
(1.8)
39,181
3,559
2,265
6,493
8,145
13.7
3.9
345
1,256
7,234
4
7,231
2,360
4,871
(6.8)
4,871
5.7
(6.8)

Source: Company, HDFC sec Inst Research

FY15
68,742
15.3
45,528
4,168
2,244
7,726
9,077
13.2
11.4
297
1,395
7,978
(7)
7,985
2,526
5,459
12.1
5,459
6.4
12.1

FY16E
69,839
1.6
45,333
4,519
2,006
7,636
10,345
14.8
14.0
171
1,597
8,919
13
8,906
2,847
6,058
11.0
6,058
7.1
11.0

FY17E
78,448
12.3
50,704
5,003
2,400
8,225
12,117
15.4
17.1
186
1,938
10,364
15
10,349
3,296
7,053
16.4
7,053
8.3
16.4

FY18E
86,954
10.8
56,512
5,451
2,621
8,799
13,571
15.6
12.0
217
2,186
11,603
17
11,586
3,672
7,914
12.2
7,914
9.3
12.2

(Rs mn)
SOURCES OF FUNDS
Share Capital
Reserves
Total Shareholders' Funds
Total Debt
Deferred Taxes
Long-term Provisions & Others
TOTAL SOURCES OF FUNDS
APPLICATION OF FUNDS
Net Block
CWIP
Investments, LT Loans &
Advances
Inventories
Debtors
Cash & Equivalents
ST Loans & Advances, others
Total Current Assets
Creditors
Other Current Liabilities & Provns
Total Current Liabilities
Net current Assets
TOTAL APPLICATION OF FUNDS

FY14

FY15

FY16E

FY17E

FY18E

850
850
850
850
850
36,465 39,696 43,482 48,066 53,511
37,315 40,546 44,332 48,916 54,361
176
176
176
176
1,051 1,259 1,399 1,549 1,699
38,365 41,981 45,907 50,641 56,235
9,980 10,902 16,304 18,366 20,180
650 1,619 1,619 1,619 1,619
19,670 18,957 19,157 19,607 20,057
11,856
5,178
1,200
1,032
19,266
5,969
5,232
11,201
8,065
38,365

15,228
5,550
298
1,460
22,536
5,933
6,113
12,046
10,491
41,968

14,350
5,740
353
1,397
21,840
6,458
6,555
13,013
8,827
45,907

16,120
6,448
1,025
1,569
25,162
7,224
6,889
14,112
11,049
50,641

17,867
7,147
2,835
1,739
29,588
8,051
7,157
15,208
14,380
56,235

Source: Company, HDFC sec Inst Research

Page | 6

EXIDE INDUSTRIES : RESULTS REVIEW 2QFY16

Cash Flow
(Rs mn)
Reported PAT
Non-operating & EO items
PAT from Operations
Interest expenses
Depreciation
Working Capital Change
Other Operating Items
OPERATING CASH FLOW ( a )
Capex
Free cash flow (FCF)
Investments
INVESTING CASH FLOW ( b )
Debt Issuance
Interest expenses
FCFE
Share capital Issuance
Dividend
FINANCING CASH FLOW ( c )
NET CASH FLOW (a+b+c)
Non-operating and EO items
Closing Cash & Equivalents

Key Ratios
FY14
4,871
(10)
4,861
12
1,256
613
74
6,816
(1,301)
5,514
(3,269)
(4,570)
(12)
5,514
(1,782)
(1,794)
452
1,200

Source: Company, HDFC sec Inst Research

FY15
5,459
(27)
5,432
17
1,395
(3,340)
209
3,712
(3,285)
427
713
(2,572)
176
(17)
603
(2,201)
(2,042)
(901)
298

FY16E
6,058
6,058
25
1,597
1,731
140
9,552
(7,000)
2,552
(200)
(7,200)
(25)
2,552
(2,272)
(2,297)
55
353

FY17E
7,053
7,053
30
1,938
(1,550)
150
7,622
(4,000)
3,622
(450)
(4,450)
(30)
3,622
(2,469)
(2,499)
672
1,025

FY18E
7,914
(0)
7,914
35
2,186
(1,521)
150
8,764
(4,000)
4,764
(450)
(4,450)
(35)
4,764
(2,469)
(2,504)
1,810
2,835

PROFITABILITY (%)
GPM
EBITDA Margin
APAT Margin
RoE
RoIC
RoCE
EFFICIENCY
Tax Rate (%)
Asset Turnover (x)
Inventory (days)
Debtors (days)
Payables (days)
Cash Conversion Cycle (days)
Debt/EBITDA (x)
Net D/E
Interest Coverage
PER SHARE DATA
EPS (Rs/sh)
CEPS (Rs/sh)
DPS (Rs/sh)
BV (Rs/sh)
VALUATION
P/E
P/BV
EV/EBITDA
OCF/EV (%)
FCF/EV (%)
FCFE/mkt cap (%)
Dividend Yield (%)

FY14

FY15

FY16E

FY17E

FY18E

34.3
13.7
8.2
13.6
25.2
13.3

33.8
13.2
7.9
14.0
22.2
13.6

35.1
14.8
8.7
14.3
22.1
13.8

35.4
15.4
9.0
15.1
22.7
14.7

35.0
15.6
9.1
15.3
22.9
14.9

32.6
31.6
1.6
1.6
73
81
32
29
37
32
68
79
0.0
(0.6)
(0.2)
2,010 (1,173)

32.0
1.5
75
30
34
71
0.0
(0.2)
686

31.8
1.5
75
30
34
71
0.0
(0.2)
691

31.7
1.5
75
30
34
71
0.0
(0.3)
683

5.7
7.2
1.8
43.9

6.4
8.1
2.2
47.7

7.1
9.0
2.3
52.2

8.3
10.6
2.5
57.5

9.3
11.9
2.5
64.0

28.1
3.7
16.2
5.2
4.2
4.0
1.1

25.1
3.4
14.9
2.7
0.3
0.4
1.4

22.6
3.1
13.1
7.1
1.9
1.9
1.4

19.4
2.8
11.1
5.7
2.7
2.6
1.6

17.3
2.5
9.8
6.6
3.6
3.5
1.6

Source: Company, HDFC sec Inst Research

Page | 7

EXIDE INDUSTRIES : RESULTS REVIEW 2QFY16

RECOMMENDATION HISTORY
Exide

Date
22-Oct-14
3-Feb-15
30-Apr-15
31-Jul-15
28-Oct-15

TP

Oct-15

Sep-15

Aug-15

Jul-15

Jun-15

May-15

Apr-15

Mar-15

Feb-15

Jan-15

Dec-14

Nov-14

Oct-14

210
200
190
180
170
160
150
140

CMP
152
195
171
146
161

Reco
NEU
NEU
NEU
NEU
NEU

Target
158
181
173
152
159

Rating Definitions
BUY
: Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL
: Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Page | 8

EXIDE INDUSTRIES : RESULTS REVIEW 2QFY16

Disclosure:
We, Navin Matta, MBA, & Sneha Prashant, MBA, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our
views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in
this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its
Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further
Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.
Any holding in stock No
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not based on any specific merchant banking, investment banking or brokerage service transactions. HDFC Securities may have issued other reports that are inconsistent with and reach
different conclusion from the information presented in this report.
Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We
have not received any compensation/benefits from the subject company or third party in connection with the Research Report.

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