Exide Industries : Securties

BSE Index Analysis, Securties , Standard Experts 

Exide Industries : 

Margin Pressure Evident; Cut Estimates

.
Reco : Hold    

Cmp : 126    

Target : 131

Improvement in Exide EBITDA margin (to 14.7% in Q4 from 13.2% in Q3) was lower than our est. of 17% mainly due to 

(a) pricing pressure from OEMs which led to decline in overall automotive margin and 

(b) Marginal decline in Replacement: OEM ratio to 1.2:1 in Q4 from 1.24:1 in Q3. Management guided for 16-18% margin in FY13.

Reduce margin estimate for FY13, FY14; maintain HOLD

We reduce our FY13E and FY14E margins to 16.6% and 16.8% from 18% and 18.2% earlier to factor in recent price rationalization and increasing competitive intensity in replacement market. EPS for FY13E and FY14E stand at Rs 7.7 and Rs 9 (cut of 10% for FY13 and FY14 each). Our revised TP stands at Rs 131 (12.5x FY14E core earnings of Rs 9.4 + Rs 14/ share as value of insurance) vs. Rs 143 earlier.

Key Highlights:
Pricing: Management has clarified that price rationalization in April will have 2% impact on blended realization, which is lower than street expectation of 5-7%.