A Promising Business Model
Exide Industries Ltd. is one of the leading storage battery manufacturers in India with a wide range of products catering to commercial, industrial and defence sectors. With a current market cap of 18865 crores (approx. Quarter ended Dec 2018), it is the highest among its peers. The company is pushing its boundaries and has already entered the e-vehicle sector. Exide has tied up with East Penn manufacturing in the US and their subsidiary Ecoult in Australia in its effort to expand to a wider market.
Operating margin has increased by 1.42% in the Quarter ending December 2018. The Debt-Equity ratio has fallen by 75% and book value has further grown by 7.89% which are indicators of fundamental strength & improvement in the business model for the company.
India’s headline inflation numbers had dropped to 2.2% in recent times due to which Exide Industries had reported a drop in the operating revenue. However, the situation is likely to improve post the populist budget rolled out by the BJP government, which was backed up with a 25 bps rate cut by the RBI in quick succession. The RBI’s move to boost business sentiments is likely to boost Exide’s top line growth in the coming quarters.
Positive Forward Guidance
A positive trend can be observed in the quarterly results between FY16 -FY18. The price for the stock has also seen a significant increase over this period from FY16-FY18. The March quarters have always seen a rise in revenue compared to the Dec quarters between FY16- FY18. On a YOY basis, the revenue increase has been a staggering 17.23% between March 16 & Mar 2017, while revenue growth has clocked a 14.57% rise between March 17 & Mar 2018. Therefore Exide is likely to witness higher revenues and profit margins in the upcoming quarter ending Mar 2019.