Stock to buy: Exide Industries
The Current Market Price (CMP) of the stock of Exide Industries Ltd. is around Rs. 182. Giving a buy rating, Sharekhan has estimated a Target Price for the stock at Rs. 215. The stock trades at an attractive valuation at P/E multiple of 11.4x and EV/EBITDA multiple of 6.8x its FY2024E estimates. Exide is the largest battery manufacturer in the lead acid battery markets, commanding a market share of close to 55% in the organised market. Exide Industries (Exide) reported mixed results in Q2FY23, with revenues below our expectations by 9.5%, while EBITDA margins expanded 30 bps more than expectations.
Company performance: demands & market share
Exide is expected to benefit from a robust automotive and industrial demand and expects its market share to grow in both OEMs and replacement markets. The company plans its 12-gigawatt lithium-ion cell manufacturing plant to start production by FY24 and fully operative by FY26, with a total investment of Rs. 6,000 crore from internal accruals. Standalone net revenues were up 13% y-o-y to Rs. 3,719 crores in Q2FY23, led by high single-digit volume growth and price hikes taken by the company during the year.
Stock to hold: Balkrishna Industries Ltd.
The Current Market Price (CMP) of the stock of Exide Industries Ltd. is around Rs. 1978. Giving a hold rating, Sharekhan has estimated a Target Price for the stock at Rs. 2163, due to concerns over Europe’s crop yield and production and expensive valuations. The stock trades at a P/E multiple of 22.9x and EV/EBITDA multiple of 16.6x its FY2024E estimates. Q2FY2023 results were above expectations, led by better-than-expected volume growth, partially offset by RM headwinds.
Company performance: net revenue growth & EBITDA
The company’s net revenue grew by 31.9% y-o-y (up 2.2% q-o-q) during Q2FY2023. EBITDA and PAT declined by 14.5% y-o-y (down 2.4% q-o-q) and 35% y-o-y, respectively. EBITDA margin is expected to remain under pressure, driven by unfavourable product mix and increased other operating costs. Well geographically diversified portfolio, timely execution of capex plans, market share gains, and entry into new markets continue to drive double-digit revenue growth going forward, despite headwinds in European business.
The above stocks were picked from the brokerage reports by Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.