While announcing the March quarter results on Wednesday, the Exide Industries Ltd management said it lost out on revenue growth due to capacity constraints for automotive batteries. Yet, on the back of surging automobile sales witnessed in the last four quarters, it posted a 28% rise in net sales on a year-on-year (y-o-y) basis, to Rs1,028.3 crore.
Although there were no significant price increases, Exide’s 16% volume expansion in the automotive segment was the main growth engine. After all, it has a 70% market share in the automotive original equipment space. Besides, it is steadily trying to raise its share in the replacement market, where it commands 55-60%.
However, a slowdown in telecom tower installations led to contraction of revenue from this segment. The industrial battery segment, therefore, grew by only 10% on a y-o-y basis.
Exide’s volumes and its captive lead smelters have led to better profitability. Operating profit margin (OPM) for the quarter was 21% compared with about 17% in the year-ago period. Captive smelters, which account for 42% of total lead used, is a cheaper source of raw material. Also, during the quarter, rupee appreciation brought in “foreign exchange gains” on lead imports, which boosted profit margins.
Graphic: Yogesh Kumar / Mint
Sequentially, OPM was down by about 160-170 basis points. This could be due to the high cost inventory of lead. Though the average lead price during the March quarter was about $2,211 (Rs98,610 today)/ tonne, lead prices had surged in January to around $2,500/tonne. This is reflected in the rise in raw material costs on a quarter-on-quarter basis, from about 56% to 58% of sales.
Exide’s net profit nearly doubled y-o-y to Rs134 crore during the quarter. The scrip closed at Rs123, which discounts the earnings of Rs6 per share for fiscal 2010 by about 21 times.
Given its pricing power as a market leader in the automotive segment, analysts believe that revenue growth momentum will be maintained during fiscal 2011. How much this will translate into earnings expansion will depend on howprices of lead price move.
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