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Geojit Financial
Exide Industries (Buy)
Target: ₹217
CMP: ₹182.85
Exide Industries (EIL) is a leader in storage battery business with a market share of 60 per cent in India. Its segment includes automotive and industrial batteries and holds 86 per cent market share in the 2-wheeler space.
Q4FY21 revenue grew by 43 per cent y-o-y, primarily due to lower base and strong growth from the Aftermarket and UPS segment. As a result, EBITDA margin expanded by 90 bps.
Despite 20 per cent increase in lead price for the quarter, stringent cost control measures led the PAT to grow by 45 per cent y-o-y.
While the economy is on the path of gradual recovery, newer cost-effective brands of EIL at competitive prices will continue to drive growth in the replacement market.
Robust revival in the auto sales numbers due to cyclical change will continue to benefit the company, owing to its market leadership.
We expect the ongoing headwinds is only for near term and anticipate strong growth from Q2 onwards. On a SOTP basis, we value EIL at 16x on FY23 EPS and insurance business at 0.9x EV (Embedded value) and maintain our ‘Buy’ rating at CMP.
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