A Hidden Diamond - Exide Industries  

  

When we are thinking about batteries the first thing it comes to our mind is Exide.
Exide industry is celebrating its 75th anniversary this year with India’s Independence.

Exide industries limited manufacturers the extensive range of batteries in the world 

catering to the universal spectrum of applications.

In 2013 Exide industries acquired a Life insurance company and started a business line 

along with the battery business and exited last year.
The company possesses 7 factories across India and is notably the only company that 

provides submarine batteries to the Indian navy.

The company provides automotive batteries for four Wheelers and two Wheelers in 

India under Exide, SF, Sonic, and Standard Furukawa Brands.
The company serves all the major industrial and service sectors like railways, telecom, 

power, and other industrial sectors including uninterrupted power supply, inverters, and EVB.
Exide is one of the five companies in the world which can manufacture submarine batteries of the international mark. They manufacture submarine batteries for India's defense requirement
They export to 50 countries around the world with different brand names.

    

Client Profile:
 The Automobile sector is one of the major markets nationally and internationally. 

Auto Majors like Hero, Honda, Maruti, Hyundai, etc. are on their customer list. 
Industrial customers are Emmerson, Ericsson, Hitachi, Cipla, and Godrej along with Tata’s and Govt Majors like BHEL, etc. are all in the card of the company.
Distribution network:
Exide has more than 150 Warehouses and sales offices along with 55,000 direct and indirect distributors in India which have created the sales and distribution system robust, dynamic, efficient, and legendary for this company.

Future Plan:
Exide Industries has moved its business from Led-based products to lithium-ion-based products since 2018. Recently the management has announced a ₹ 6000 Cr. Setup in Karnataka for the new product. This will support the increasing national and global demand for the EV market.

Financial Analysis:
The Last 10 years’ financial data explains the depth of the company’s entire structure and health. There are a few crucial ratio analyses that may open the hidden future of the company and may forecast the possibilities and degrees of profit abilities.

a)  The RoE and RoCE are a few important ratio analyses to understand the profitability of the company. From the below charts we can be convinced there is a quality increment in profitability from previous years.
But truly speaking theses huge percentage of growth has been observed in the covid years when their entire global market was fighting with the pandemic. 
Then how there is why the increase in return is abnormally high!  
Exide Industries has sold its insurance business in covid time (2021) to HDFC Life insurance company and that has increased the return of the company.

b)  It is very important to understand the solvency part of the company. It is all about the short-term liquidity of the company.
As per the data the company is holding a good Current ratio for the last 10 years, which shows a quality short-term debt management ability skill.

                                        
c)  The Financial leverage of a company can be understood from
The debt position of the balance sheet of the company. The Debt-to-equity ratio is nil last 5 years simply showing the strength of the management of the company. 
 
d)  The company is managing quality operation profitability and that is showing the quality of the management.
 
e)  Valuation Analysis: Fair Value
From this analysis, we can understand the Free Cash flow (FCF)generation. – The cash is freely available to the company.
The Calculation is based on the average of the last 3 years’ generation of FCF multiplied by 5 years (expected FCF) divided by nos. of issued share.
As per the Margin of Safety (MoS) concept the decision to invest in this stock can be taken around 50% of the fair value mark which means ₹326 level. Now, the price is around the ₹150 level, which means this stock is undervalued, and trading much lower than the MoS mark could be a good point of entry for this multi-bagger Stock.
 

Market Mechanics:
In this essay, I am trying to create an overview of this Battery giant through all the required models of understanding. Market mechanics also will a big role here.
 
a) Shareholding Patterns:
Here we will discuss the different shareholding patterns of the company.
The promoter holding: Chloride Eastern Limited 46%
FII: GOVERNMENT PENSION FUND GLOBAL 2.07%
DII: LIFE INSURANCE CORPORATION OF INDIA - P & GS Fund 5.50% 
Non- Institutional: Hathway Investments Private Limited 4.32%
There are no pledges in the promoters’ holdings. 
It has been observed a stable FII holding with an increasing public holding in the stock.

b) Competitor analysis:
We have compared another 4 best companies of the same sector with Exide industries for better understanding. 

                                

Here the trailing PE and PB of Exide Industries show a great valuation compared to other companies.

Price Time Analysis:
This analysis forecasts the probable support and resistance based on Price and time (not Volume).
As per This analysis if the current price goes above ₹157.2 and stands above in the daily time frame then 1st resistance will be ₹185.47 and further ₹206.7 and lastly ₹300.

Conclusion: 
Exide Industries has proven management with a quality framework for the future which we can observe through the above analytical essay. The Below Decision Rader explains this company is full of future growth with a full of future profitability, better financial health with No Bankruptcy threat, a best-proven Management, and yet a very good for investment. A multi-bagger Company at the end.

                    

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