Exide stock may give 30% returns in next nine months

Exide Industries Ltd has been one of India’s most reliable battery brand for more than 70 years enjoying an unrivalled reputation. The company designs, manufactures, markets and sells the widest range of lead acid storage batteries in the world from 2.SAh to 20,600Ah capacity covering a broad spectrum of applications. The batteries are manufactured for the automotive, power, telecom, infrastructure projects, computer industries, as well as the railways, mining and defence sectors. The company enjoys a leadership position in India and exports to over 60 countries across six continents. The company’s nine factories are strategically located all over India, out of which seven factories are dedicated to batteries, while two factories manufacture home UPS systems. The company has consistently remained at the forefront of international battery technology with the help of its collaborators–Shin Kobe and Furukawa of Japan, East Penn of the US and Ecoult of Australia. It has introduced various best-in-class products and power storage solutions for domestic and global markets. Exide is a preferred choice for most of the original equipment manufacturers in the UPS segment because of superior product performance and excellent after sales service. The company’s advanced products have received great response from telecom customers and the products have been found to be superior in performance and have made significant inroads in establishing itself as a preferred vendor in the Telecom segment. The Solar division is also registering a robust growth and the company has now forayed in offering complete packages for the home usage of customers. The company has also forayed into Lithium-ion battery systems and energy solutions through its subsidiary Exide Leclanche Energy Private Limited (under the brand Nexcharge), together with the JV partner Leclanche SA, Switzerland. With its state-of-the-art Research & Development centre, Exide Leclanche aims to build lithium-ion battery modules and packs and provide energy storage systems for India’s electric vehicle (EV) market. Exide Industries reported a 20% y-o-y growth in top line for the second quarter of the financial year 2021-22 with revenue from operations growing by 19.5% y-o-y. But due to sharp input cost inflation, gross profit had a limited increase to 11.8% during the same quarter. However, EBITDA and Profit before Tax grew by 5.5% and 3.1% respectively. Key highlights for the second quarter were that the replacement demand was quite strong for the automotive batteries due to easing of the lockdown restrictions from June2021 onwards. Moreover, the UPS battery sales in the Industrial segment grew at a robust pace in the second quarter as well, driven by continuous rise in makeshift home offices and data centres. The company shareholders have approved divestment of its shareholding in Exide Life Insurance Company Limited to HDFC Life Insurance Company Limited. Total sale consideration is Rs.6,687 crores and will be paid in the form of Rs.726 crore as cash consideration and issuance of 8,70,22,222 equity shares of HDFC Life Insurance Company Limited at a price of Rs.685 per share. The completion of the transaction is subject to receiving all necessary approvals and is estimated that the sale will be completed before 30 June 2022. Though the Exide stock has not participated in the recent bull run, fund managers and analysts are quite bullish on the stock. They expect that this transaction is likely to enhance value for shareholders of the company. Medium term investment in the Exide stock can deliver very good returns and analysts expect the stock currently quoting at Rs 176 to appreciate by 30% in the next nine months time frame.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.