Whalesbook
Exide Industries Ltd. experienced a recovery in its stock price on Monday, November 17, after its management provided a positive outlook during an earnings call, despite a challenging September quarter. The company reported a net profit of ₹221 crore, marking a 25.8% year-on-year decline, with revenue falling by 2.1% to ₹4,178 crore. EBITDA also saw a dip, with margins contracting to 9.4%.
Despite these results, Exide Industries' management is confident about a strong rebound in the third quarter. They expect the solar business, which faced a temporary setback in Q2 after a strong Q1, to recover sharply, aided by a recent reduction in GST rates. The after-market segment is also poised for significant growth, supported by robust replacement demand for two-wheeler and four-wheeler batteries. While OEM demand for these batteries showed high single-digit growth in Q2, it is anticipated to improve further.
International geopolitical conditions continue to put pressure on the company's export business. Exide Industries has implemented several price increases throughout the year, pausing only after the GST cut, which is expected to stimulate demand.
A significant development highlighted was the progress at Exide Energy, the company's lithium-ion cell manufacturing subsidiary. Management confirmed that progress is on schedule, with the first production line for two-wheeler cells nearing completion and product validation trials set to commence in Q3. The company noted immense interest and "huge" traction from Indian Original Equipment Manufacturers (OEMs) for domestically produced cells. Equipment installation for subsequent lines is also progressing well.
The company forecasts Q3 to be a stronger period for both four-wheeler and two-wheeler battery volumes, with the Solar and Home UPS businesses also projected to achieve faster expansion.
Impact
This news can significantly impact Exide Industries' stock performance as investor sentiment improves based on the positive future outlook and strategic expansion into the crucial lithium-ion battery segment. The forecast for a Q3 rebound suggests a recovery path after a weak quarter. Rating: 7/10
Definitions:
OEM (Original Equipment Manufacturer): A company that manufactures products based on designs supplied by another company, often selling them under another brand name. In this context, it refers to vehicle manufacturers who buy batteries to install in new vehicles.
GST (Goods and Services Tax): A comprehensive indirect tax levied on the manufacture, sale, and consumption of goods and services in India.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A measure of a company's operating performance, indicating profitability before accounting for financing decisions, accounting decisions, and tax environments.