Recommendation from Batteries sector

This column gives you a scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.[EasyDNNnews:PaidContentStart]

EXIDE INDUSTRIES : FULLY CHARGED FOR GROWTH

HERE IS WHY
✓ Strong market share
✓ Innovative products
✓ Impressive revenue

The world has been undergoing significant changes due to the adverse impact of climate change. This has led to increased usage of renewable sources such as solar and wind and spawned new industries focused on storing electricity in batteries such as battery energy storage systems (BESS). According to Mordor Intelligence, the India battery market size is expected to grow from USD 16.77 billion in 2023 to USD 27.70 billion by 2028 at a CAGR of 10.56 per cent. Taking into the account the growth of battery solutions in India and around the world, the choice scrip for this issue is Exide Industries, which is primarily engaged in the manufacturing of storage batteries and allied products in India.

Exide Industries designs, manufactures, markets and sells the widest range of lead acid storage batteries in the world from 2.5 Ah to 20,600 Ah capacity to cover the broadest spectrum of applications. It manufactures batteries for the automotive, power, telecom, infrastructure projects, computer industries as well as the railways, mining and defence sectors. The company has nine factories strategically located all over India of which seven factories are dedicated to batteries and the other two factories manufacture home UPS systems

In Q1FY24, on a consolidated basis the company’s revenue rose by 5.56 per cent YoY to ₹4,245.48 crore compared to ₹4,021.77 crore in the same quarter the previous year. On a sequential basis, revenue increased by 15.47 per cent. Net profit stood at ₹223.85 crore compared to ₹202.15 crore, a YoY increase of 10.73 per cent, while sequentially it increased by 23.87 per cent.

India’s expected electrification demand is projected to reach 150 GWh by 2030 driven by increasing adoption of iCloud services, rising per capita data consumption, the growth of renewables in India, rollout of 5G technology and the electrification of railways. The company offers a range of EPH series batteries for data centres, a new line of traction batteries and a 5G-ready solution for the telecom industry. Additionally, the company has introduced two new frontiers: Exide Sunday, a comprehensive rooftop solar solution and BESS, a battery energy storage solution.

The company has developed and manufactures Li-ion-based modules and packs along with battery management systems (BMS) for electric vehicle (EV) and stationary power applications. This facility, with a capacity of 1.5 GWh, is located in the automotive hub of Gujarat and is named Nexcharge. Nexcharge possesses strong technical capabilities to meet diverse customer specifications in the automotive industry including battery packs for buses, three-wheelers, twowheelers, light and medium-duty vehicles, and various other industrial utilities.

The company is also engaged in another project named Exide Energy, which focuses on lithium-ion cell manufacturing. This project has a total capacity of 12 GWh and an estimated project cost of ₹6,000 crore to be completed in two phases. The company is currently trading at a PE of 26.7x as against the industry PE of 29.8x. In the last three years the company has delivered average ROE of 22.2 per cent and ROCE of 10.3 per cent, respectively. Considering the company’s business and its leading position in the overall battery space, we recommend BUY.

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