Rising Lead Prices To Act As Headwind For Exide, Say Brokerages

Battery maker Exide Industries Ltd. reported a net profit decline of 6 percent year-on-year during the January-March period, missing analyst estimates.

The company’s margins on earnings before interest, tax, depreciation and amortization saw a contraction of 637 basis points to 8.86 percent compared to 15.23 percent during the corresponding quarter last year.

While most brokerages maintained their rating on the stock, they echoed the management’s concerns over the rising lead prices acting as a headwind going forward for the company.

Here’s a quick take on what brokerage made of Exide’s earnings performance:

Citi On Emami

• Rating: Maintains Buy
• Price Target: Raised to Rs 280 from Rs 270

• Revenues were above estimates
• Higher revenues reflect higher than expected inverter sales and better realizations due to price hikes
• High lead prices impacted margins
• Can see near-term volatility but long-term outlook remains positive
• Remain sanguine on replacement demand aided by Exide's stable market share and healthy pricing environment
• Any uptick in inverter and hope UPS battery segment can be a source of upside risk
• Increase revenue estimates by 2/1% over FY18/19
• Cut EPS estimates by ~2% as view on lead pricing remains cautious

Credit Suisse On Exide

• Rating: Neutral
• Price Target: Rs 190

• Sales growth of 11.6 percent was a positive surprise
• Scope to undertake price hikes remains limited
• Recovery in OEM-led growth will also be a headwind for gross margins
• Valuation discount to Amara Raja Batteries on a 12-month forward consensus P/E is down to 7 percent

UBS On Exide

• Rating: Buy
• Price Target: Rs 258

• Revenue and net profit were ahead of estimates
• EBITDA missed estimates due to high raw material costs
• Stock performance to remain muted due to miss on EBITDA margins