CMP 160.05

Target Price 180.00

ISIN: INE302A01020

JULY 23rd

, 2014

EXIDE INDUSTRIES LTD

Result Update (PARENT BASIS): Q1 FY15

BUYBUYBUYBUY

Stock Data

Sector Auto Components

BSE Code 500086

Face Value 1.00

52wk. High / Low (Rs.) 170.00/99.05

Volume (2wk. Avg ) 502300

Market Cap ( Rs in mn ) 136042.50

Annual Estimated Results (A*: Actual / E*: Estimated)

Years FY14A FY15E FY16E

Net Sales 59726.60 68685.59 77958.14

EBITDA 8498.70 9565.52 10696.04

Net Profit 4870.80 5583.67 6330.55

EPS 5.73 6.57 7.45

P/E 27.93 24.36 21.49

Shareholding Pattern (%)

1 Year Comparative Graph

EXIDE INDUSTRIES LTD BSE SENSEX

SYNOPSIS

Exide Industries Ltd manufactures the widest

range of storage batteries in the world from

2.5 Ah to 20,400 Ah capacities, covering the

broadest spectrum of applications.

Net sales registered a growth of 17.51% to

Rs.19123.60 million for the quarter ended

June 30th 2014 as against Rs.15412.00 million

for the corresponding quarter last year.

Profit before Tax (PBT) for the June quarter

increased by 12.19% to Rs. 2673.00 million

from Rs. 2382.50 million in the corresponding

quarter ending of previous year.

The company’s net profit stood at Rs. 1853.00

million in Q1 FY15 against Rs. 1588.00 million

in Q1 FY14.An increase of 16.69% y-o-y.

Profits before Interest, Tax, Dep was at Rs.

2998.70 million as compared to Rs. 2686.50

million in the corresponding period of the

previous year.

The company has declared an interim

dividend of Rs. 1.50/- Per share on the face

value of Re.1.00/- each for the year 2014 – 15.

Total Income has increased from Rs. 16336.80

million for the June quarter of FY15 to Rs.

19211.00 million for the same period of

previous financial year.

Net Sales and PAT of the company are

expected to grow at a CAGR of 9% and 7%

over 2013 to 2016E respectively.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Exide Industries Ltd 160.05 136042.50 5.73 24.61 3.23 180.00

Motherson Sumi Systems Ltd 356.90 314757.00 6.07 58.80 19.39 250.00

Amtek Auto Ltd 242.40 52994.40 12.30 19.71 1.10 25.00

Tube Investments of India Ltd 293.55 54877.20 5.03 58.36 4.43 100.00

Analysis & Recommendation - ‘BUY’

During the quarter ending 30th June, 2014, Exide Industries Ltd reported a total income of Rs. 19211.00 million

against Rs. 16336.80 million in previous year period, which represents growth of 17.59%. The company earned

profit after tax of Rs. 1853.00 million, representing growth of 16.69% y-o-y. whereas Profits before Interest, Tax,

Dep was at Rs. 2998.70 million as compared to Rs. 2686.50 million in the corresponding period of the previous

year. PBT for the June quarter increased by 12.19% to Rs. 2673.00 million from Rs. 2382.50 million in the

corresponding quarter ending of previous year. During the quarter, demand for both Automotive and industrial

battery remained subdued. Improvement in its Automobile replacement battery sale accompanied by robust

growth in inverter battery sale for both automotive and industrial SBU along with re entry in to telecom business

helped improving performance.

The Company continues to focus on cost control and Technology up gradation to improve profit. This will enable

the company to succeed in its marketing efforts in a highly competitive market in the future. We expect that the

company surplus scenario is likely to continue for the next three years, will keep its y-o-y growth story in the

coming quarters also. Over FY2013-16E, we expect the company to post a CAGR of 9% and 7% in its top-line and

bottom-line respectively. Hence, we recommend ‘BUY’ for ‘EXIDE INDUSTRIES LTD’ with a target price of Rs.

180.00 for medium to long term investment.

Investment Highlights (PARENT BASIS)

Results updates- Q1 FY15,

Rs. In million JUNE-14 JUNE-13 % Change

Net Sales 19123.60 16274.70 17.51

PAT 1853.00 1588.00 16.69

EPS 2.18 1.87 16.69

EBITDA 2998.70 2686.50 11.62

The company’s net profit Jumps to Rs. 1853.00 million against Rs. 1588.00 million in the corresponding quarter

ending of previous year, an increase of 16.69% Y-O-Y. Net sales for the quarter rise up by 17.51% to Rs. 19123.60

million from Rs. 16274.70 million in the prior period last year. Reported earnings per share of the company

stood at Rs. 2.18 a share during the quarter, registering at 16.69% increase over previous year period. EBITDA is

Rs. 2998.70 million as against Rs. 2686.50 million in the corresponding period of the previous year.

Expenditure:

During the quarter, total Expenditure rose by 19 per cent mainly on account of increased cost of material

consumed by 10%, Depreciation by 8% and other expenses by 16% increase are the primary attribute for the

growth of expenditure when compared to corresponding quarter of previous year. Total expenditure in Q1 FY15

stood to Rs. 16535.60 million as against Rs. 13950.70 million in Q1 FY14.

Break up of Expenditure

In Rs. Millions

Q1 FY15 Q1 FY14

Cost of Material consumed 13295.10 12073.10

Purchases of Stock in Trade 1.90 10.90

Employee Benefit Expenses 1000.10 937.90

Depreciation & Amortization

Expenses 323.30 300.40

Other Expenditure 2542.20 2195.80

Company Profile

Exide Industries Limited was incorporated as Associated Battery Makers (Eastern) Ltd, on 31st Jan, 1947 under

the Companies Act, 1913 to purchase all or any of the assets of the business of manufacturers, buyers and sellers

of and dealers in & repairers of electrical and chemical appliances and goods carried on by the Chloride Electric

Storage Company (India) Ltd, in India , since 1916 with a view thereto to enter into and carry into effect (either

with or without modification) an agreement has prepared & expressed to be made between the Chloride Electric

Strage Co (India) Ltd on the one part and the Company of the other part.

The name of the Company was changed to Chloride India Ltd on 2nd August, 1972. The name of the Company

was again changed to Chloride Industries Ltd. vide fresh Certificate of Incorporation dated 12th October, 1988.

The name of the Company was further changed to Exide Industries Ltd. on 25th August, 1995.

The Company manufactures the widest range of storage batteries in the world from 2.5 Ah to 20,400 Ah

capacities, covering the broadest spectrum of applications. The Company has six factories strategically located

across the country-two in Maharashtra and Tamil Nadu, one in West Bengal, and one in Haryana. The Company’s

predecessor carried on their operations as import house from 1916 under name Chloride Electrical Storage

Company. Thereafter, the Company started manufacturing storage batteries in the country and has grown to

become one of the largest manufacturer and exporter of batteries in the sub-continent. Exide separated from its

UK-based parent, Chloride Group Plc., in 1989, after the latter divested its ownership in favour of a group of

Indian shareholders. The Company has grown steadily, modernized its manufacturing processes and taken

initiatives on the service front.

Business Areas:

Automotive Batteries

In India the company markets the products under Exide, SF, Sonic and Standard Furukawa brands and supplies

to all car and two-wheeler manufacturers. In international market sells products under Dynex, Index & Sonic

brands. It has distribution network of 4000 outlets, supported by 4 regional offices and 28 branch offices. It also

exports batteries to the Middle East, Japan and CIS countries.

Industrial Batteries

It manufactures industrial batteries in a wide range from 2.5 Ah to 20,600 Ah. In India it sells products under

Exide, Index, SF, CEIL and Power Safe brands and in international market under CEIL, Chloride and Index

brands. Industrial batteries cater mostly to the infrastructure sector such as railways, telecom, power plants,

solar cells and other industrial segments including uninterrupted power supply, inverters and traction

batteries.

Submarine Batteries

The Company is also engaged in manufacturing of high-end submarine batteries (Type 1, 2 & 3). It is one of the

five companies in the world which has capacity to manufacture submarine batteries for Russian and German

types. It manufactures two to three submarines.

Financial Highlight (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance sheet as at March 31st, 2013-2016E

FY-13A FY-14A FY-15E FY-16E

EQUITY AND LIABILITIES

Shareholder's Funds

a) Share Capital 850.00 850.00 850.00 850.00

b) Reserves and Surplus 33385.90 36464.60 40357.32 44393.06

1. Sub Total - Net worth 34235.90 37314.60 41207.32 45243.06

Non-Current Liabilities

a) Deferred Tax Liability (net) 976.50 1050.70 1128.45 1184.87

b) Other Long term liabilities 71.40 57.60 47.81 40.17

c) Long Term Provisions 205.90 203.80 207.88 210.99

2. Sub Total - Non-Current Liabilities 1253.80 1312.10 1384.14 1436.03

Current Liabilities

a) Trade payables 5604.10 6529.60 7404.57 8145.02

b) Other Current liabilities 2625.00 2485.20 2398.22 2326.27

c) Short term Provisions 1764.70 1924.70 2086.37 2190.70

3. Sub Total - Current Liabilities 9993.80 10939.50 11889.16 12661.99

Total Liabilities (1+2+3) 45483.50 49566.20 54480.62 59341.08

ASSETS

Non-Current Assets

Fixed Assets

i. Tangible Assets 9775.70 9768.30 10159.03 10504.44

ii. Intangible Assets 168.40 211.90 262.76 315.31

iii. Capital work-in-progress 587.70 509.80 458.82 408.35

a) Total Fixed Assets 10531.80 10490.00 10880.61 11228.10

b) Non Current Investments 14594.00 15946.00 17285.46 18564.59

c) Long Term loans and advances 516.20 641.90 763.86 878.44

d) Other non-current assets 14.50 12.00 10.56 11.19

4. Sub Total - Non-Current Assets 25656.50 27089.90 28940.49 30682.32

Current Assets

a) Current Investments 1807.30 3724.10 5695.32 7521.82

b) Inventories 11671.00 11855.70 12270.65 12761.48

c) Trade receivables 5091.90 5166.40 5290.39 5449.11

d) Cash and Bank Balances 747.90 1199.50 1703.29 2299.44

e) Short-terms loans & advances 482.00 530.60 580.48 626.91

f) Other current assets 26.90 0.00 0.00 0.00

5. Sub Total - Current Assets 19827.00 22476.30 25540.13 28658.76

Total Assets (4+5) 45483.50 49566.20 54480.62 59341.08

Annual Profit & Loss Statement for the period of 2013 to 2014E

Value(Rs.in.mn) FY13A FY14A FY15E FY16E

Description 12m 12m 12m 12m

Net Sales 60768.30 59726.60 68685.59 77958.14

Other Income 704.20 246.10 327.31 366.59

Total Income 61472.50 59972.70 69012.90 78324.74

Expenditure -52873.20 -51474.00 -59447.38 -67628.69

Operating Profit 8599.30 8498.70 9565.52 10696.04

Interest -41.70 -11.90 -9.28 -7.89

Gross profit 8557.60 8486.80 9556.24 10688.16

Depreciation -1134.80 -1256.00 -1369.04 -1486.78

Profit Before Tax 7422.80 7230.80 8187.20 9201.38

Tax -2195.00 -2360.00 -2603.53 -2870.83

Net Profit 5227.80 4870.80 5583.67 6330.55

Equity capital 850.00 850.00 850.00 850.00

Reserves 33138.70 36227.40 40357.32 44393.06

Face value 1.00 1.00 1.00 1.00

EPS 6.15 5.73 6.57 7.45

Quarterly Profit & Loss Statement for the period of 31st DEC, 2013 to 30th SEP, 2014E

Value(Rs.in.mn) 31-Dec-13 31-Mar-14 30-Jun-14 30-Sep-14E

Description 3m 3m 3m 3m

Net sales 13039.30 16129.80 19123.60 17498.09

Other income 49.20 98.10 87.40 78.66

Total Income 13088.50 16227.90 19211.00 17576.75

Expenditure -11613.40 -13940.90 -16212.30 -15135.85

Operating profit 1475.10 2287.00 2998.70 2440.90

Interest -3.80 0.20 -2.40 -3.02

Gross profit 1471.30 2287.20 2996.30 2437.88

Depreciation -316.60 -325.80 -323.30 -334.29

Profit Before Tax 1154.70 1961.40 2673.00 2103.59

Tax -379.50 -640.00 -820.00 -656.32

Net Profit 775.20 1321.40 1853.00 1447.27

Equity capital 850.00 850.00 850.00 850.00

Face value 1.00 1.00 1.00 1.00

EPS 0.91 1.55 2.18 1.70

Ratio Analysis

Particulars FY13A FY14A FY15E FY16E

EPS (Rs.) 6.15 5.73 6.57 7.45

EBITDA Margin (%) 14.15 14.23 13.93 13.72

PBT Margin (%) 12.21 12.11 11.92 11.80

PAT Margin (%) 8.60 8.16 8.13 8.12

P/E Ratio (x) 26.02 27.93 24.36 21.49

ROE (%) 15.38 13.14 13.55 13.99

ROCE (%) 28.64 26.31 26.54 26.93

EV/EBITDA (x) 15.73 15.87 14.04 12.50

Book Value (Rs.) 39.99 43.62 48.48 53.23

P/BV 4.00 3.67 3.30 3.01

Charts

Outlook and Conclusion

� At the current market price of Rs.160.05, the stock P/E ratio is at 24.36 x FY15E and 21.49 x FY16E

respectively.

� Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.6.57 and Rs.7.45

respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 9% and 7% over 2013 to 2016E

respectively.

� On the basis of EV/EBITDA, the stock trades at 14.04 x for FY15E and 12.50 x for FY16E.

� Price to Book Value of the stock is expected to be at 3.30 x and 3.01 x respectively for FY15E and FY16E.

� Hence, we recommend ‘BUY’ in this particular scrip with a target price of Rs.180.00 for Medium to Long

term investment.

Industry Overview

Auto industry has been recording tremendous growth in India over the years and has emerged as a major

contributor to India’s gross domestic product (GDP). The industry currently accounts for almost 7 per cent of our

GDP and employs about 19 million people both directly and indirectly.

The automotive industry occupies a significant place in the Indian economy. India is emerging as a global hub for

auto component sourcing and is set to break into the league of the top five vehicle producing nations worldwide.

The country is also emerging as a sourcing hub for engine components. The Indian auto component sector covers

a wide range of industries, including engine parts, drive transmission and steering parts, body and chassis,

suspension and braking parts, equipment and electrical parts, besides others.

The ever-increasing development in infrastructure, huge domestic market, increasing purchasing power and

stable government framework have made India a favourable destination for investment, as per the vision of

Automotive Mission Plan (AMP) 2006–2016.

Market Structure

� The Indian auto component industry is estimated to have a US$ 66 billion turnover by 2015–16 and is

expected to grow at a 14 per cent compound annual growth rate (CAGR) by 2013–2021, according to

Automotive Component Manufacturers’ Association of India (ACMA) – the nodal agency for the Indian auto

component industry. In addition, industry exports are estimated to reach US$ 12 billion by 2015–16.

� The cumulative foreign direct investment (FDI) inflows into the Indian automobile industry during the

period April 2000 to January 2014 was recorded at US$ 9,344 million.

� According to data released by the Society of Indian Automobile Manufacturers (SIAM), the domestic sales of

automobiles during 2013–14 grew by 3.53 per cent over the same period last year. The automobile exports

grew 7.21 per cent during the fiscal.

� India has become a research and development (R&D) hotbed and in keeping with the global R&D trend of last

year, the country is now a preferred destination for automotive R&D, according to a study on the Global Top

500 R&D spenders done by Zinnov. India's position is highlighted by the fact that 874 MNCs have set up

1,031 centres and 45 per cent of the top 500 global R&D spenders have a presence here.

India: The Global Auto Hub

• Nissan India is currently exporting a number of child parts, engine and body parts to overseas markets. “We

export to about 101 countries worldwide and there are many parts that we export from India regularly to 14

countries, including big markets like the UK, Brazil, Mexico and USA.

• South Africa is pitching its auto component industry to Indian automakers for partnerships. Accompanied by

a delegation of 27 companies, Ms Elizabeth Thabethe, Deputy Minister of Trade and Industry, South Africa,

met Indian companies in a trade summit facilitated by Southern India Chamber of Commerce and Industry.

• RSB Transmissions has entered into a partnership with DHB Automotivos, Brazil to launch auto components

in India. The new range of products was unveiled at the Auto Expo 2014 Components Show at Pragati

Maidan, New Delhi. Launched fully assembled manual/power steering gears and also auto components like

steering rack & pinion, tie rod, hydraulic pump and aluminium pump in ultra-modern tech facilities in

partnering with DHB Automotivos, Brazil.

• Volkswagen is looking at investing Rs 15000.00 million (US$ 248.55 million) over the next five years to set

up a diesel engine manufacturing facility.

• Infosys has signed a multi-year contract with Volvo Cars to provide application development services to the

latter's global operations. The application development work includes maintaining applications to support

multiple domains, including marketing and sales, customer service, manufacturing, product development and

corporate business functions.

Key Developments & Investments

� Denso International India is working on future components for improving fuel emissions for Indian as well as

global cars, two-wheelers and commercial vehicles manufacturers. The company manufactures components

such as air conditioning systems, fuel pump, inter-coolers, power window motors, radiator, starter motor,

and engine cooling modules from its manufacturing plants in Jhajjar and Manesar in Haryana, Bengaluru,

Haridwar and Greater Noida.

� Tata Opportunities Fund will purchase a significant minority stake in Aurangabad-based auto component

maker Varroc group for US$ 60 million.

� MRF launched main wheel tyres for the Indian Air Force (IAF)'s Sukhoi 30 MKI. These tyres were designed by

MRF's inhouse R&D facilities and have been tested for ground speeds of up to 420 km an hour with loads in

excess of 18 tonnes a tyre.

� Tata Cummins, a joint venture (JV) between Cummins Inc and Tata Motors, inaugurated its third

manufacturing facility located at the Cummins Megasite in Phaltan to manufacture diesel engines.

Government Initiatives

The Government of India allows 100 per cent FDI in the automotive industry through automatic route. With a

special focus on exports of small cars, multi-utility vehicles (MUVs), two and three wheelers and auto

components, the automotive sector’s contribution to the GDP is expected to double reaching a turnover worth

US$ 145 billion in 2016, according to the AMP 2006–2016.

The Interim Budget 2014–15 added some incentives to the auto industry. To give relief to the automobile

industry the excise duty has been reduced till June 30, 2014 as follows:

� For small cars, motorcycle, scooters – the duty has been reduced from 12 per cent to 8 per cent.

� For commercial vehicles and SUVs – the duty has been reduced from 30 per cent to 24 per cent.

� For large and mid-segment cars – the duty has been reduced from 27/24 per cent to 24/20 per cent.

Road Ahead

The rapidly globalising world is opening new dimensions for the transportation industry, generating need for

more efficient, safe and reliable modes of transportation.

Cars will become ‘smart devices on wheels’, so much so that the car will become an extension of your

smartphone or vice versa. Today, several companies – including Google and Apple – are working on connected

vehicles. By 2020, the industry estimates that nearly 90 per cent of vehicles on the road will be wired, while the

connected car market will hit US$ 600 billion – making it the single largest market for connected devices and

services. Experts predict that in future most of the additions to a car will be digital features rather than physical.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

C.V.S.L.Kameswari Pharma

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