Exide Industries- Focus On Premium Products, Calibrated Price Hike To Aid in Margin Expansion: HDFC Securities

HDFC Securities Retail Research

Exide Industries Ltd. is the leading battery manufacturer in India catering to automobiles and industrial segments. The company is present in the original equipment manufacturer as well as replacement and export segments.

Exide is the market leader in the organised lead acid battery segment, commanding the majority market share in the domestic market. In organized OEM segment, its overall market share three/four-wheeler is ~60% while two-wheeler it is ~75%.

Over the last three years the company has almost doubled its distributor network and entered new geographies in Europe and Russia.

In the domestic market, organised players are expected to continue gaining market share in the auto replacement segment due to goods and services tax and stricter environmental norms. The company has collaborated with Svolt, China to set up lithium-ion battery manufacturing plant in India. SVOLT partnership would support manufacturing / technology /raw material procurement. It has already incurred capex of Rs 715 crore and expects total capex of Rs 4000 crore in the first phase by FY25.

With increasing electric vehicle penetration, the company would have first mover advantage as the homologation process with OEM takes 1.5-two years.

Valuation and Recommendation: T

The management expects replacement demand to pick up in FY24. Its battery management system subsidiary has an outstanding orderbook of Rs 600-700 crore and expects revenue of Rs 400-500 crore in FY24.

Focus on premium products and calibrated price hike should aid in margin expansion. The high capex lithium ion battery business could provide trigger for the medium term although it carries risk of execution and technology changes.

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