Exide Industries Ltd put up a mixed performance for the June quarter (Q1). While revenue and profits raced past estimates, profitability was a tad lower, which pushed down the stock. The beat in net revenue, which powered ahead by 32.6% year-on-year, can be attributed to the buoyancy in the automotive segment that accounts for more than half its sales volumes.

Demand for batteries was strong both in the original equipment and replacement sectors. According to the company, even the industrial segment comprising telecom, UPS (uninterrupted power supply) and infrastructure segment batteries did well during the quarter.

That said, one must take into account the low base of the year-ago period.

Higher sales trickled down to register a decent 20.6% growth in Ebitda (earnings before interest, tax, depreciation and amortization).

Tight cost management, along with lead recycling that has been Exide Industries’ forte, helped partially alleviate the impact of rising raw material prices.

Lead price rose by 10% year-on-year. This, along with adverse currency movements, hurt profitability in spite of high revenue growth.

The company’s Ebitda margin slipped by 140 basis points to 14.1%, a tad below expectations. Fortunately, robust sales improved operating leverage to arrest the negative impact on profitability.

Still, the Street wasn’t impressed. The Exide Industries stock declined by 3.3% to 270.40, while the benchmark Sensex was down 0.23%.

Other factors limiting growth in net profit to 11% were lower other income, higher depreciation and taxation.

The stock trades at about 20 times one-year forward estimated earnings for fiscal year 2020 and the rich valuation might sustain as long as battery sales growth continues. Softer lead prices seen in the last few months may improve margins in the quarters ahead.