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Tuesday, May 19, 2009

Exide Industries Ltd:-Future outlook and growth prospects

Scripscan:Exide Industries Ltd
Traded in:Nse-bse

Story:Exide Industries is engaged in manufacturing and selling storage batteries. It manufactures lead acid storage batteries used for starting piston engines and other lead acid accumulators.Exide is expected to post a 20% growth in profit in fy10.I feel the company may quote at a much higher price and may surprise one regarding the upsise potential.I get a feeling 85-95 should be the fair value for the counter.The target price is based on the following: (1) core lead acid battery business at 16.5x FY10E EPS of Rs 4.9 equals Rs 80; and (2) 50% stake in ING Vysya Life at 16x FY09E NBAP equals Rs 15 per share.The company may post single digit growth numbers as EBITDA per unit of battery sales would remain flat due to: (1) the company no longer increasing battery prices amid rising competition and stable lead price; (2) cost-savings bottoming out; and (3) slower industrial battery growth at 19% in FY09 versus 25% in FY07.The key risk to Exide''s rating is higher lead price - the company''s earnings can decline by 63% if lead costs rise by 15% without a commensurate rise in battery prices. Exide has managed to improve its margins despite tripling of lead price in the past three years, with pricing power and cost-savings.I expect the same to continue, going forward.Overall its a bet meant for long term investors with expectations of realistic return.If you fall under the same fraternity,Go for it then.The company very recently has declared a dividend of rs 2 which is still for the taking.A 3%+ dividend yield adds moolah to the story.

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