Buy Exide Industries; target of Rs 194: Prabhudas Lilladher

Prabhudas Lilladher's research report on Exide Industries

EXIDE 2QFY21 margins exceeded expectations at 14.2% (PLe 13%, +10bp YoY) led by cost control measures and better gross margins. While there was significant pick up in replacement and UPS batteries demand, OEM segment too started picking up in later part of the quarter. Going forward we believe stronger growth in replacement segment (~65% of industry) to continue coupled with recovery in OEM demand. Consequently, favorable mix along with benign RM should help ~150bp YoY margin expansion in FY21 to 15.3%. We increase FY21/FY22/23 EPS by 7.4%/2.9%/1.3% to factor in higher replacement sales. We expect organized players including EXIDE to see market share expansion (~1-1.5% in CV, tractor and motorcycle segment)) led by weakening competitive position of small regional/unorganized players.

Outlook

Hence, we maintain buy with revised price target of Rs194 (earlier Rs191) based on 14x Sep-22 standalone EPS plus Rs21 value of insurance business. Stock trades at 13.7x/12.6x FY22/23 EPS.

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