At first glance, it appears that Exide Industries‘ June-quarter earnings have not impressed the markets. The stock fell over a per cent in morning trade on Monday (July 31), following a 2 per cent fall in the previous session.
During market hours on July 28, Exide Industries reported a net profit of ₹224.1 crore in the quarter ended June 2023, registering a growth of 10.7 per cent as compared to a profit of ₹202 crore in the corresponding quarter of last year. The company’s revenue in Q1FY24 increased 5.6 per cent to ₹4,245.5 crore from ₹4,021.7 crore, YoY.
Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 13.1 per cent to ₹438.1 crore from ₹387.3 crore in the year-ago quarter. EBITDA margin expanded by 70 basis points (bps) to 10.3% from 9.6 per cent, YoY.
The stock ended 1.88 per cent lower on July 28.
Read more: Exide Industries Q1 Results: Net profit rises 10.7% to ₹224 crore; revenue up 5.6% YoY
What do brokerages say after Q1?
Kotak Institutional Equities has maintained a ‘reduce’ call on Exide Industries but raised the target price to ₹225 from ₹190.
However, the brokerage firm increased its FY2025-26 EPS (earnings per share) estimates by 2-4 per cent on higher revenue assumptions which is partly offset by lower EBITDA margin assumptions.
Kotak expects Exide to deliver steady performance in the near term.
“The company will be foraying into the EV (electric vehicle) battery space over the coming years; however, the company needs to secure orders from OEMs (original equipment manufacturers). Given the limited opportunity in the EV PV (passenger vehicle) segment, the company will have to secure orders in other segments,” said Kotak.
“Valuation remains fair at the current juncture and re-rating of the stock will depend on its ability to transition to lithium-ion technology as well as the competitive intensity in lithium-ion battery space in India. Also, profitability in the EV battery segment may be lower than the company’s current margin profile given the dependence on technology from Svolt (royalty payout). We maintain a ‘reduce’ rating with a revised fair value of ₹225 from ₹190 based on 12 times September 2025E EPS and ₹54 per share for a stake in HDFC Life,” said Kotak.
Nuvama Wealth Management has retained a ‘hold’ call on the stock with an unchanged target price of ₹255.
“Lithium-ion for EVs is the future, and Exide is setting up a cell manufacturing facility with a considerable investment of ₹4,000 crore for phase-1. Any progress on tie-ups with OEMs for battery supplies should provide better revenue visibility. Entry into the lithium-ion space will ensure long-term survival/growth, but large investments can be RoE-dilutive over the next few years,” said Nuvama.
Shares of Exide Industries traded 0.62 per cent lower at ₹249.60 around 12:15 pm.
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Updated: 31 Jul 2023, 12:25 PM IST