Exide expects better replacement sales, margins2 min read . Updated: 21 Jul 2011, 07:02 PM IST
Exide expects better replacement sales, margins
Mumbai: Exide Industries expects better replacement sales to auto makers in the second half of the current fiscal year and also plans to start making inverters to drive growth, a top official said in a conference call with analysts on Wednesday.
“In the third and fourth quarter of this year we expect better off-take in the replacement of the sales coming from OEMs (original equipment manufacturers) supplies, which happened in the third or fourth quarter of 2008/09," said managing director T.V. Ramanathan.
He expects Exide’s profit margins also to improve in the second half of the fiscal year because of better replacement sales and higher capacity.
Exide, India’s largest auto and industrial battery maker, expects total sales in FY12 to grow 12%-15%, Ramanathan added.
The firm had reported net sales of ₹ 4,553 crore in FY11, a growth of about 20% on year.
It expects to increase its two wheeler battery capacity to 21.6 million units by December from about 18.6 million now, while four wheeler batteries is expected to rise to 12 million batteries per annum from 10.1 million now.
The company had on Wednesday reported flat first-quarter numbers that fell short of expectations. Demand for automobile batteries and inverters had been lower during the quarter, the company had said. .
On Thursday Deutsche Bank downgraded Exide to ‘hold’ from ‘buy’ with a target price of ₹ 160 after disappointing first quarter earnings. Exide’s operating results are weak and were below consensus estimates, Deutsche bank said in a note.
Exide’s shares plunged as a result of the disappointing results and downgrade and closed 9.39% lower at ₹ 154.35.
Indian car sales, which grew at a breakneck 30% in the fiscal year that ended in April, are now expected to slow to 10% to 12% in FY12, down from an earlier forecast of 16% to 18%, industry group the Society of Indian Automobile Manufacturers forecast.
Car sales in Asia’s third largest economy, which in June saw their slowest pace of growth since March 2009, are driven by a burgeoning middle class that relies on bank loans for purchases. But India’s central bank has raised interest rates 10 times since March last year in an effort to battle stubbornly high inflation, a move that has hurt credit-based purchases.
The growth of the Indian auto component industry is directly linked to the auto sector’s growth and with OEMs accounting for more than 70% of domestic sales.
The company also plans to start manufacturing inverters by the end of the financial year to drive sales of inverter batteries.
“Sales of inverters will underwrite the volume and profitability of inverter batteries."