Buy Exide Industries; target of Rs 300: ICICI Direct

ICICI Direct’s research report on Exide Industries

Exide Industries (EIL) revenues increased 24.5% YoY to | 2,459 crore vs. our estimate of | 2,506 crore. According to the management, battery volumes across segments (4-W, 2-W, inverter, UPS, telecom and solar batteries) were strong during the quarter EBITDA margins expanded 49 bps YoY & 133 bps QoQ to 13.7% vs. estimate of 12.9%. Higher raw material cost (average lead price in Q4FY18 increased 6% YoY to | 162/kg) resulted in gross margin contraction of 258 bps YoY.

Outlook

Thus, we value its core business at 20x FY20E EPS of | 12.4/share. EIL is also engaged in the life insurance business and considering the recent deals of some of its peers, we value its business at 2x FY20E embedded value to arrive at a price of | 48/share. Thus, on an SOTP basis, we revise our target to | 300 and maintain our BUY recommendation on the stock.

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