Outlier in Focus: Exide Industries

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We come across a large number of interesting stocks in Capitalmind SNAP Outliers, our discovery tool for stocks with momentum. See a video of how Outliers works, and how to use Outliers to find all-time highs. Here’s a stock we found interesting that’s been an outlier. Catch them all here.

This week we take a look at the Outlier – Exide Industries [Check the stock out here on SNAP].

Today we look at the leader in the duopolistic market [Amara Raja being the only competitor] for automotive batteries – Exide Industries.

Exide is one of the very few companies [also makes high-end submarine batteries] in the world providing a wide range of battery storage range [2.5Ah to 20,000Ah].

Across its 9 factories, Exide has the capacity to produce around 34.2 million units of automobile batteries (including batteries for motorcycle applications) annually, and over 2,824 million ampere-hours of industrial power every year.

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Exide Life Insurance Company [business of life insurance and providing financial investment products] is one of the subsidiaries of the company not involved in the primary business of battery manufacturing.

Financials

Exide reported PAT of Rs. 693.64 crore (2016-17) against Rs. 624.46 crore last year. Major growth for the company was in the form of replacement sale in Automotive and Motorcycle batteries with improvement seen in the UPS business as well.

Exide has planned a capex of Rs. 1,400 crore for 2017-18 majorly for technology up-gradation with the target of become cost efficient.

Exide expects structural recovery [three phase replacement cycle of Charging, Peak Capacity and Gradual Deterioration] to continue for the automotive segment. This clubbed with the company’s strategy of hiving off the businesses from less profitable OEMs [in the past Exide disrupted the prices to gain additional market share] is expected to improve the margins.

Exide’s major cost driver in the battery business is the price of lead [lead and lead alloys form more than 70% of the total material consumption by value]. While 30% of the business which are majorly with OEMs have a “Lead price variation clause” protecting the business from Lead price volatility while the remaining 70% which is exposed to the retail segment does not have this cushion.

Outlier History

Witnessing a breakout on the last trading day of the previous week, Exide closed at an all time high of Rs. 242/-.