Exide 3Q Results Slightly Above Estimates, Citi Says; Affirms Buy Call
Citi Research says the Indian battery maker's margin trends have been encouraging despite lower non-autos demand (industrial/infrastructure)
(The Corner Office Journal) -- Brokerage Citi Research affirmed Buy rating on Exide Industries Ltd. with a target price of 540 rupees after the Indian battery maker’s 3QFY25 results slightly beat its estimates, driven by gross margin expansion.
The target price implies a return of over 57% from the stock’s closing price of 343.35 rupees on the National Stock Exchange yesterday.
3QFY25 Results
Exide’s 3QFY25 revenue of 38.5 billion rupees (flat year-on-year; down 10% quarter-on-quarter) was 2% below its estimate, reflecting weaker auto OEM revenue, Citi said in an investor note.
However, gross margin at 32% rose 50 basis points YoY as well as QoQ, and was 50bps above estimate, possibly reflecting stable commodity costs and better mix, it added.
The brokerage said EBITDA at 4.5 billion rupees (+2% YoY; down 7% QoQ) was 3% above estimate, with EBITDA margin of 11.7% (+20bps YoY; +40bps QoQ) coming in 60bps above estimate.
Net profit at 2.45 billion rupees (+2% YoY; down 17% QoQ) was 5% above estimate.
Management Take
Citi said the management noted that demand in the replacement automotive segment has been strong in both two-wheeler and four-wheeler sub-segments.
Demand in the solar segment is also strong, aided by government incentives and various “solarization” programs, it added.
However, demand from automotive OEMs remains muted and demand in the industrial infra segment is also weak due to lower government spending and tepid private capital expenditure outlay, Citi said.
The brokerage said the management expects the commodity prices to remain broadly stable.
Implications
Citi said Exide’s margin trends have been encouraging despite lower non-autos demand (industrial/infrastructure).
“Possible increase in demand in this segment could boost overall revenue and profit,” it added.
The brokerage said the commencement of operations at the lithium-ion cell plant remains the key development to watch out for.
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