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Powering on, Maintain Buy In our Exide IC note, we had indicated that EXIDE had taken several initiatives on the automotive side and the corrective actions over the past 2-3 years have yielded strong results and has further enhanced its position in the automotive replacement market. As a follow up series, we have now done our exhaustive channel checks with more than 50+ inverter/UPS battery dealers across all the brands and understand that similar to the automotive segment, the company has taken significant efforts to fill up the gaps and has deployed several corrective actions on the inverter/industrial side. Our interactions further suggest that these corrective actions have started yielding results in this segment as well.

� Inverter/UPS battery demand remains buoyant in 1QFY2019: Based on the interaction with inverter dealers, we understand that the overall demand remained quite strong in 1QFY2019. Strong double digit sales was also indicated by dealers located in areas that are primarily strong markets for inverter sales like the northern and eastern parts of the country. Further, 1Q is seasonally a strong quarter for inverter sales. Dealers believed that the demand will remain robust owing to 1) gradual shift towards organized players post implementation of GST 2) Strong brand recall for Exide 3) new product launches across Exide and SF sonic brands generating growth, 4) Healthy addition in network infrastructure 5) Growing traction in the UPS segment.

� Exide positioned as a premium brand and enjoys top of the mind recall in inverter/UPS battery segments: Exide continues to command pricing premium of 5-6% over other brands. When asked about battery brands in the inverter and UPS category, dealers said that Exide enjoys the highest 'top of the mind recall'. However, Luminous is a close competitor and is gaining market share owing to a wide product range, strong after sales service and enhanced visibility. While AMRJ lacked presence above 150Ah+ segment, it has now filled this gap with the launch of 180Ah and 200Ah tubular batteries (however product range + warranty periods remain limited).

� Significant improvement in product quality and service framework: Similar to the automotive segment, Channel checks indicated a significant improvement in the overall product quality which was reflected in lower claim ratios. Also the improvement in service infrastructure is reflected in lower TAT at 3-5 days vs. 10 days earlier. Digitization of complaint process, on-site warranty and overall increase in support infrastructure has aided faster TAT.

� Valuation and recommendations: We believe that the recent efforts will continue to have a positive impact on the company in terms of market share and expect EBITDA/PAT CAGR of 17.9%/17.4% over FY2018-20E, led by revenue growth of 13.5%. We value core business on five year AOCF/EV yield methodology at Rs276/share and assign Rs43/share for life insurance business to arrive at a TP of Rs319. Key risks for the company include margin pressure due to high lead volatility and faster than expected EV penetration.

Target Price Rs319 Key Data

CMP* Rs291 Bloomberg Code EXID IN

Upside 10% Curr Shares O/S (mn) 850.0

Previous Target 322 Diluted Shares O/S(mn) 850.0

Previous Rating BUY Mkt Cap (Rsbn/USDbn) 247.3/3.5

Price Performance (%)* 52 Wk H / L (Rs) 293.9/192.4

1M 6M 1Yr 5 Year H / L (Rs) 293.9/99

EXID IN 10.0 36.8 43.5 Daily Vol. (3M NSE Avg.) 2109054

NIFTY 3.1 7.8 17.0

*as on 10 August 2018; Source: Bloomberg, Centrum Research

Shareholding pattern (%)*

Jun-18 Mar-18 Dec-17 Sep-17

Promoter 46.0 46.0 46.0 46.0

FIIs 11.2 10.6 10.4 10.1

DIIs 20.2 19.5 19.4 18.3

Others 22.6 24.0 24.2 25.7

Source: BSE, *as on 10 August 2018

Exide : Business mix (FY18E)

Source: Company, Centrum Research

Centrum vs. Bloomberg Consensus*

Particulars (Rs mn)

FY19E FY20E

Centrum BBG Var (%) Centrum BBG Var (%)

Sales 1,03,890 1,07,546 (3.4) 1,18,348 1,22,480 (3.4)

EBITDA 14,721 15,335 (4.0) 17,240 18,106 (4.8)

PAT 8,641 8,761 (1.4) 9,864 10,353 (4.7)

Bloomberg Consensus* Centrum Target Price (Rs)

Variance (%)

BUY SELL HOLD Target Price

(Rs)

25 2 7 291 319 10.7

Source: Bloomberg, Centrum Research Estimates

Ajay Shehtiya, [email protected]; 91 22 4215 9636

Aditya Iyer, [email protected]; 91 22 4215 9391

.

Y/E Mar (Rsmn) Revenue YoY (%) EBITDA EBITDA (%) Adj. PAT YoY (%) Adj. EPS (Rs) RoE (%) RoCE (%) PE (x) EV/EBITDA (x)

FY2016 68,536 (0.2) 10,160 14.8 6,244 14.4 7.3 14.6 14.0 20.2 11.5

FY2017 76,284 11.3 10,825 14.2 6,936 11.1 8.2 14.6 13.9 22.1 13.3

FY2018 91,863 20.4 12,408 13.5 6,959 0.3 8.2 13.4 13.5 26.5 14.6

FY2019E 103,890 13.1 14,721 14.2 8,392 20.6 9.9 14.8 14.5 29.5 16.6

FY2020E 118,348 13.9 17,240 14.6 9,588 14.3 11.3 15.4 15.0 25.8 14.2

Source: Company, Centrum Research Estimates

13

3625

10

4

3 3

4

1 2W

4W

Inverters

UPS

Telecom

Solar

Traction

Ind exports

Submarine

Company Update 14 August 2018

BUY Automobiles

INDIA

Exide Industries

2 Exide Industries

Positioning of Exide in the inverter segment: Commands premium over other brands

EXIDE is present in the inverter aftermarket battery market majorly through three brands viz. Exide, SF Sonic and Dynex. The mother-brand Exide is positioned as a premium brand and largely operates in the higher end of the market with an extensive product portfolio ranging from 100Ah all the way to 230Ah and across all the warranty periods. In the inverter segment, SF Sonic is priced at a 12-15% premium to AMRJ unlike the automotive segment where it is priced at par with Amaron. The Dynex brand was introduced in the value segment largely to compete with other local brands in the unorganized market. Dynex is at a lower price point compared to other brands and largely focuses on gaining share from the unorganized segment with a fixed warranty of 18 months.

Key Learnings based on dealer interaction

� Exide – the mother brand at premium positioning , even SF Sonic is at premium to AMRJ: Similar to the automotive segment, Exide the mother-brand continues to command premium pricing and is priced at 5-6% premium to Luminous (its second largest competitor in the inverter segment) and 12-15% to AMRJ. While in the automotive segment the pricing of SF Sonic and AMRJ is largely same and is positioned to compete with the later, in the inverter segment based on the dealer interaction, we understand that it commands premium to AMRJ.

� Exide has a much wider product portfolio across Ah and warranty periods: We witnessed that Exide has one of the widest product lines in the inverter battery space and is present in almost all warranty periods. As seen in the product portfolio below, Exide has a much wider presence from the 88Ah segment to the 230Ah segment. AMRJ on the other hand lacks products in 200Ah+ category (refer Exhibit #4). Moreover, EXIDE is also present in far more warranty periods compared to AMRJ. Launch of Inva Master (IMT-1500) tubular battery in the 150Ah segment has helped the company deal with Luminous in the inverter segment. Dealers also indicated that Exide has aggressively improved its in service quality, delivery and turnaround time for warranty claim batteries.

� Dealer margins: Based on the interaction with the dealers, we understand that margins in the inverter and inverter battery segments are highest for Luminous. Given higher profitability for Luminous products, the push from dealers is on the higher side. Within the EXIDE product portfolio, we understand that the DP margins are better for the flagship EXIDE brand compared to SF Sonic. Also based on the interaction with the industrial dealers (SBU II), we understand that unlike the automotive segment, where the Humsafar dealers are rewarded in the form of Humsafar Points, there is no incentive structure for industrial dealers as largely it is a B2B offering. Further, we understand that at the retailer level, the normal discounting is nearly to the extent of ~6-10% in the inverter battery segment.

Exhibit 1:

Source:

Exhibit 2:

Source: Channel Checks, Company, Centrum Research, Warranty period comprises of free replacement and pro

Positioning

Pricing

Warranty

Product Features and Technology

WARRANTY PERIOD

Exhibit 1: EXIDE’s ( mother brand)

Channel Checks, Company, Centrum Research

Exhibit 2: Product offerings by Exide in inverter segment


48 Month GELMA

I50AH

18+18 M

INSTAB88/100/135

Positioning

Pricing

Warranty

Product Features and Technology

3

XIDE’s ( mother brand)


Industry shifting towards a shift in consumer preference from flat plate to tubular batteries. Exide and SF sonic are leading the way in tubular technology adoption and although AMRJ is present in the tubular battery space it lackmore sophisticated and delivers energy faster, has at least 20% more electrical capacity, and up to a 30% longer service life than flat plate batteries. These batless frequent water top up. The average life of the battery is 3with light use the battery can last for 6

Product offerings by Exide in inverter segment


onth AGIC

0AH

Month

BRITE 5/150AH

Exide is the flagship brand positioned segment

Priced at a premium

• 15

• 6

Has the widest product range and warranty periods of months

Has the widest product range and 230Ah with maximum number of batteries in the short tubular and tall tubular and flat plate offerings

Features and

XIDE’s ( mother brand) Product portfolio


Industry shifting towards a shift in consumer preference from flat plate to tubular batteries. Exide and SF sonic are leading the way in tubular technology adoption and although AMRJ is present in the tubular battery space it lacks the variety more sophisticated and delivers energy faster, has at least 20% more electrical capacity, and up to a 30% longer service life than flat plate batteries. These batless frequent water top up. The average life of the battery is 3with light use the battery can last for 6



48 Month INVAGO I50AH

42 Month INVATUB115/150/180/200/2

36 Month INVAMASTER

150AH (S&T)/180/2

24 Month

INVAPLUS 100/150AH

Flat

Exide is the flagship brand ositioned in the egment

Priced at a premium

15% Premium to A

6-7% Premium

Has the widest product range and Present across different warranty periods of months to 48 months

Has the widest product range and Present from 80AH to 230Ah with maximum number of batteries in the short tubular and tall tubular and flat plate offerings

Product portfolio in Inverter battery segment

Industry shifting towards a shift in consumer preference from flat plate to tubular batteries. Exide and SF sonic are leading the way in tubular technology adoption and although AMRJ is present in the tubular battery space

s the variety and wide more sophisticated and delivers energy faster, has at least 20% more electrical capacity, and up to a 30% longer service life than flat plate batteries. These batless frequent water top up. The average life of the battery is 3with light use the battery can last for 6



BULAR 230AH

STER

200AH

24

T

Flat

Exide is the flagship brand in the premium

Priced at a premium

% Premium to AMRJ

% Premium to SF Sonic

Has the widest product range Present across different

warranty periods of 18+6 months

Has the widest product range from 80AH to

230Ah with maximum number of batteries in the short tubular and tall tubular and flat plate

in Inverter battery segment

Industry shifting towards tubular Batteries: a shift in consumer preference from flat plate to tubular batteries. Exide and SF sonic are leading the way in tubular technology adoption and although AMRJ is present in the tubular battery space

and wide ranges that more sophisticated and delivers energy faster, has at least 20% more electrical capacity, and up to a 30% longer service life than flat plate batteries. These batless frequent water top up. The average life of the battery is 3with light use the battery can last for 6-7 years as well.



36 + 12 Month

INVAMASTER IM10000

24 + 12 Month

TUBEMASTER 135/150AH

TECHNOLOGY

Short Tubular

Positioned as a grab a higher share of business from the industry

Priced at a premium

• 12-15

• 20% Premium to Dynex

Present across the entire product range across different warranty periods of to 48 months

of batteries in the short tubular

The product range is to 230AH with a healthy mix of tubular and flat plate technology.


ubular Batteries: Industry interactions indicated that there has been a shift in consumer preference from flat plate to tubular batteries. Exide and SF sonic are leading the way in tubular technology adoption and although AMRJ is present in the tubular battery space

that are offered by Exide and SF sonicmore sophisticated and delivers energy faster, has at least 20% more electrical capacity, and up to a 30% longer service life than flat plate batteries. These batless frequent water top up. The average life of the battery is 3

7 years as well.


CEIL115/

CEIL

100S/

24+

100/1

18

TECHNOLOGY

Tubular

Positioned as a fighter brand to grab a higher share of business from the industry

Priced at a premium

15% Premium to A

% Premium to Dynex

Present across the entire product range across different warranty periods of 18

months

The product range is to 230AH with a healthy mix of tubular and flat plate technology.


Industry interactions indicated that there has been a shift in consumer preference from flat plate to tubular batteries. Exide and SF sonic are leading the way in tubular technology adoption and although AMRJ is present in the tubular battery space

are offered by Exide and SF sonicmore sophisticated and delivers energy faster, has at least 20% more electrical capacity, and up to a 30% longer service life than flat plate batteries. These batteries require lesser maintenance and less frequent water top up. The average life of the battery is 3-4 years considering heavy use. But

7 years as well.

Source: Channel Checks, Company, Centrum Research, Warranty period comprises of free replacement and pro-rata

42 Month CEIL PREMIUM 15/150/200AH

36 Month

CEIL TUBULAR

100S/150S/150T AH

+12 Month CEIL

POWER 0/150S/150T AH

18+18 Month

CEIL 135/150AH

fighter brand to grab a higher share of business

% Premium to AMRJ

% Premium to Dynex

Present across the entire product range across different

18 months

The product range is from 90Ah to 230AH with a healthy mix of tubular and flat plate


are offered by Exide and SF sonic. Tubular plate design is more sophisticated and delivers energy faster, has at least 20% more electrical capacity, and up to

teries require lesser maintenance and 4 years considering heavy use. But

36 Month

BOSS T115/150

24 Month

BOSS SHORT 100/150

Introduced in FY2017 and positioned as a value brand to compete in the unorganized segment

Priced lower than competition

• 10% lower than

• Competes with local brands

• Present in limited categories

Available at a flat warranty period of 18 months

Mainly focused in the 150Ah segment

Exide Industries


. Tubular plate design is more sophisticated and delivers energy faster, has at least 20% more electrical capacity, and up to


onth

TALL 50AH

onth

SHORT 0 AH

Introduced in FY2017 and positioned as a value brand to compete in the unorganized


10% lower than AMRJ

Competes with local brands

Present in limited categories

Available at a flat warranty period of 18 months

Mainly focused in the 150Ah

Exide Industries


. Tubular plate design is more sophisticated and delivers energy faster, has at least 20% more electrical capacity, and up to


Introduced in FY2017 and positioned as a value brand to compete in the unorganized


AMRJ

Competes with local brands

Present in limited categories

Available at a flat warranty

Mainly focused in the 150Ah

4 Exide Industries

Exhibit 3: Expanding existing segments and creating new opportunities

Source: Company, Channel checks, Centrum Research

Exide Inverter Segment – Product and Pricing analysis

� Exide Leading in Technology and product Range: Exide has the widest product range and is present across almost all warranty periods. Moreover, Exide has a large number of products in the high quality tubular segment compared to its peers. Exide has over 25 products in the tubular battery segment which is much higher than its peer Amaron. Luminous has a range comparable to Exide in terms of numbers but the warranty periods cannot be matching. All three brands namely Exide, SF sonic and Luminous have a product in the tubular gel based battery segment. It is interesting to note that , with a combined presence with all its brands Exide can boast of presence in almost all warranty periods and product categories, the combined presence in higher than luminous , AMRJ and all other peers.

� Exide retains premium pricing: The premium end of the market is dominated by Exide and luminous while SF sonic is positioned below these top brands and unlike what we witnessed in the automotive segment, AMRJ is priced lower than competition. Exide’s products are priced from Rs 9,597 to Rs26,369, Luminous has a range starting from Rs9,600 to Rs25,100. SF sonic is priced below the top two brands and ranges from Rs8,868 to Rs24,813. As mentioned earlier AMRJ has a lower product range compared to the other brand and the pricing varies from Rs8, 259 to Rs17,583.

Exhibit 4: Pricing matrix (Rs) across all the key brands

Segment

18 18+6 24 18+18 24+12 36 42 48 36+12

90 Ah

Exide

Short Tubular

Tubular

Flat Plate 7,440

SF Sonic

Short Tubular

Tubular

Flat Plate 8,783 7,957

Amaron

Short Tubular

Tubular

Flat Plate

100AH

Exide

Short Tubular 13,237 12,186

Tubular 10,134

Flat Plate 9,597

SF Sonic

Short Tubular

Tubular 12,460 10,899

Flat Plate 9,929 8,868

Amaron

Short Tubular

Tubular

Flat Plate 8,259

Existing Products New Products

Existing Segments

� Added new clients in the traction segment � Expanded range in Solar power solutions

� Launched the Dynex brand to grab share from the unorganized market

New

Segments

� Improved focus in the exports market mainly in Europe, Middle East and Africa

� Launched VRLA batteries for the private telecom space

Brand

Warranty*

5 Exide Industries

Segment

18 18+6 24 18+18 24+12 36 42 48 36+12

135Ah

Exide

Short Tubular 13,515

Tubular 15,550

Flat Plate 12,119

SF Sonic

Short Tubular

Tubular

Flat Plate 13,209 11,260

Amaron

Short Tubular

Tubular

Flat Plate 10,622 11,277

150Ah

Exide

Short Tubular 13,931 16,493

Tubular 14,873 17,754 19,645 21,957 17,754

Flat Plate 13,442 22,124

SF Sonic

Short Tubular

Tubular 13,541 14,225 16027/ 14938 18,277 20,866

Flat Plate 13,927 12,259

Amaron

Short Tubular

Tubular 15,111

Flat Plate 11,571 12,222

180Ah

Exide

Short Tubular

Tubular 21,116 21,957

Flat Plate

SF Sonic

Short Tubular

Tubular 17,583 20,431

Flat Plate

Amaron

Short Tubular

Tubular

Flat Plate

200AH

Exide

Short Tubular

Tubular 23,637 24,583

Flat Plate

SF Sonic

Short Tubular

Tubular 22,872

Flat Plate

Amaron

Short Tubular

Tubular

Flat Plate

230AH

Exide

Short Tubular

Tubular 26,369

Flat Plate

SF Sonic

Short Tubular

Tubular 24,813

Flat Plate

Amaron

Short Tubular

Tubular

Flat Plate

Source:Dealer interaction, Centrum Research, Based on recent price list - *Warranty period comprises of free replacement and pro-rata

Brand

Warranty*

6 Exide Industries

Key learnings from our exhaustive channel checks

We interacted with 50+ dealers in the inverter and industrial battery space and we infer that the demand for batteries continues to remain intact. Based on the interaction with inverter dealers, we understand that the overall demand remained quite strong in 1QFY2019 and most of the dealers in North and East which are primarily strong markets for inverter sales indicated double-digit volume growth. Dealers believed that the demand will remain robust owing to 1) restructuring in the supply chain – with inverter batteries dispatches aligned to automotive dealers 2) Strong brand recall for Exide 3) new product launches across Exide and SF sonic brands leading growth, 4) Healthy addition in network infrastructure 5)Growing traction in the UPS segment

� Restructuring in supply chain a key positive: Exide has made changes to its supply chain network, where automotive dealers have been given the responsibility to distribute inverter batteries and industrial dealers are dealing in Ups batteries, traction and motive power segments. We believe this is positive for Exide as the company has managed to leverage the vast network of automotive dealers to push more volumes which has helped deliver higher growth. In Exhibit #5 the restructuring process is mentioned in further details.

Exhibit 5: Restructuring across the supply chain into B2C ( SBU I) and B2B ( SBU II)

Source: Centrum Research Source: Centrum Research

Based on the interaction with the dealers, we understand that Exide has re-structured its channel management for the automotive and the industrial segments. The business now is largely divided into two SBU’s/buckets i.e. 1.) B2C or automotive business comprising of automotive batteries, Home UPS/inverters and inverter batteries and 2) B2B or Industrial segment comprising largely of UPS batteries and traction/industrial batteries. Power, telecom, infrastructure, railways, mining and defence segments are also being catered to through this SBU. The B2C business now accounts for 75% of its overall revenues while the rest 25% is B2B. Further interaction suggests that Exide had done this re-structuring 18-24 months back. Post re-structuring automotive dealers can sell inverter batteries and vice versa. However, on the UPS and traction the channel remains separate for the after-market.

� Annual Maintenance contracts – a norm in the industry - The warranty service is generally provided by the company directly and not from the dealer, the UPS/Inverter machine can be replaced swiftly in 1-2 days. The company service engineers go on site and can take a call on replacement instantly using a testing device. For replacement of inverter batteries which are under warranty, the average turnaround time is 8-10 days across brands in India. The process is longer because the battery needs to be charged, discharged and tested for 8 hours before validating and taking a final call. This whole process is time consuming and the entire process takes 6-8 days on an average across all brands. Most batteries are accompanied by an average maintenance contract, which entails quarterly maintenance and includes services like distilled water top up and carbon rust cleaning. The AMC cost is 7-8% of the total battery cost or Rs600 per battery and is charged on a yearly basis. The AMC revenue is shared on a 60:40 ratio between the dealer and the company.

� Exide commands best brand recall: Exide had the best top of the mind brand recall in the inverter battery segment followed by luminous which is a close second and Amaron that has the third spot. Dealers indicated that Exide has managed to leverage its brand equity in the automotive segment to command a leadership in the inverter battery space. Exide has been constantly investing in brand building activities across the country along with heavy advertising and sponsorships that have helped it create a strong brand image. Luminous is a close competitor and is gaining market share owing to a wide product range, strong after sales service and enhanced visibility arising from celebrity brand endorsements by cricketers like Sachin Tendulkar. AMRJ also has a strong presence but its product range is limited and lacks products above the 200Ah+ segment. In terms Inverter machines, Luminous and Micrtotek have a higher recall compared to Exide.

Automotive BatteriesInverter and Home UPS

Batteries

Genset Batteries E-Rickshaw

SBU1

75% of revenues

Institutional UPS Batteries

Traction and Motive Power

TelecomRailways, Mining and

Defence

SBU II

24% of revenues

7

Exhibit 6:

Source: Company

� New Product launches bode wellthe 150Ah segment for Exide have been well received in the market and have been competing with the launch of the tubular battery range in the 150AHis doing well in the market

� Growth in Network Infrastructure: many new dealers have been appointed by the company. Channel checks indicated that many mucompany. This trend is positive from a long term volume growth perspective as a stronger distribution network will augment higher sales.

� Replacement Cycle: quarter. We were able to gauge the replacement cycles of all major product lines. Most dealers indicated that the life of the machine and battery would vary based on the usage patterns aamount of load that it is subjected to. Inverter machines have a product life of 4average and come with a warranty of 1with varying warranty periods. UPS machines have a 2 years.

� Unorganized market note, we had mentioned that in the automotive segment largely in the commercial vehicle segment there is a sthe transition was visible on ground. Similar, to the automotive segment, we have our significantly on the higher side implementation of GST, the scenario has changed in favour of organized players. Most of the dealers indicated that few local branded inverter batteries have virthigher tax incidence leading tobatteries (almost the same pricinglocal batteries indicated that they 18% whereas GST on inverter batteries is at 28%. Earlier, the VAT on inverter was 5% and 12.5% on batteries.

Exhibit 6: Strong Advertisement efforts bearing fruit

Source: Company, Centrum

New Product launches bode wellthe 150Ah segment for Exide have been well received in the market and have been competing with the productslaunch of the tubular battery range in the 150AHis doing well in the market

Growth in Network Infrastructure: many new dealers have been appointed by the company. Channel checks indicated that many multi brand dealers that had earlier moved away from the Exide brand have been revived by the company. This trend is positive from a long term volume growth perspective as a stronger distribution network will augment higher sales.

Replacement Cycle: quarter. We were able to gauge the replacement cycles of all major product lines. Most dealers indicated that the life of the machine and battery would vary based on the usage patterns aamount of load that it is subjected to. Inverter machines have a product life of 4average and come with a warranty of 1with varying warranty periods. UPS machines have a 2 years.

Unorganized market note, we had mentioned that in the automotive segment largely in the commercial vehicle segment there is a sthe transition was visible on ground. Similar, to the automotive segment, we have our interactionsignificantly on the higher side implementation of GST, the scenario has changed in favour of organized players. Most of the dealers indicated that few local branded inverter batteries have virthigher tax incidence leading tobatteries (almost the same pricinglocal batteries indicated that they 18% whereas GST on inverter batteries is at 28%. Earlier, the VAT on inverter was 5% and 12.5% on batteries.

Strong Advertisement efforts bearing fruit

, Centrum Research

New Product launches bode wellthe 150Ah segment for Exide have been well received in the market and have been competing

products of luminous. Similarly a north India based SF sonic dealerlaunch of the tubular battery range in the 150AHis doing well in the market.

Growth in Network Infrastructure: many new dealers have been appointed by the company. Channel checks indicated that many

lti brand dealers that had earlier moved away from the Exide brand have been revived by the company. This trend is positive from a long term volume growth perspective as a stronger distribution network will augment higher sales.

Replacement Cycle: Most dequarter. We were able to gauge the replacement cycles of all major product lines. Most dealers indicated that the life of the machine and battery would vary based on the usage patterns aamount of load that it is subjected to. Inverter machines have a product life of 4average and come with a warranty of 1with varying warranty periods. UPS machines have a

Unorganized market - A clear shift seen towards the organized segmentnote, we had mentioned that in the automotive segment largely in the commercial vehicle segment there is a significant opportunity to be taken away from the unorganized segment and the transition was visible on ground. Similar, to the automotive segment, we have

interactions with inverter battery dealers that the presence of unorganized significantly on the higher side implementation of GST, the scenario has changed in favour of organized players. Most of the dealers indicated that few local branded inverter batteries have virthigher tax incidence leading tobatteries (almost the same pricinglocal batteries indicated that they 18% whereas GST on inverter batteries is at 28%. Earlier, the VAT on inverter was 5% and 12.5% on


New Product launches bode well: A Varanasi the 150Ah segment for Exide have been well received in the market and have been competing

of luminous. Similarly a north India based SF sonic dealerlaunch of the tubular battery range in the 150AH

Growth in Network Infrastructure: Exide has beenmany new dealers have been appointed by the company. Channel checks indicated that many


Most dealers indicated healthy demand for inverter batteries in the previous quarter. We were able to gauge the replacement cycles of all major product lines. Most dealers indicated that the life of the machine and battery would vary based on the usage patterns aamount of load that it is subjected to. Inverter machines have a product life of 4average and come with a warranty of 1-2 years. Inverter batteries have a life of 3with varying warranty periods. UPS machines have a

A clear shift seen towards the organized segmentnote, we had mentioned that in the automotive segment largely in the commercial vehicle

ignificant opportunity to be taken away from the unorganized segment and the transition was visible on ground. Similar, to the automotive segment, we have

with inverter battery dealers that the presence of unorganized significantly on the higher side (40% of the industry was unorganized). However, post the implementation of GST, the scenario has changed in favour of organized players. Most of the dealers indicated that few local branded inverter batteries have virthigher tax incidence leading to a narrowing pricing differential between branded and local batteries (almost the same pricing). An interaction with local batteries indicated that they have s18% whereas GST on inverter batteries is at 28%. Earlier, the VAT on inverter was 5% and 12.5% on


: A Varanasi based Exide Dealer indicated thatthe 150Ah segment for Exide have been well received in the market and have been competing

of luminous. Similarly a north India based SF sonic dealerlaunch of the tubular battery range in the 150AH segment has been receiving good demand and

Exide has beenmany new dealers have been appointed by the company. Channel checks indicated that many


alers indicated healthy demand for inverter batteries in the previous quarter. We were able to gauge the replacement cycles of all major product lines. Most dealers indicated that the life of the machine and battery would vary based on the usage patterns aamount of load that it is subjected to. Inverter machines have a product life of 4

2 years. Inverter batteries have a life of 3with varying warranty periods. UPS machines have a



with inverter battery dealers that the presence of unorganized % of the industry was unorganized). However, post the

implementation of GST, the scenario has changed in favour of organized players. Most of the dealers indicated that few local branded inverter batteries have virt

narrowing pricing differential between branded and local ). An interaction with have stopped dealing in local brands. The GST on inverter is

18% whereas GST on inverter batteries is at 28%. Earlier, the VAT on inverter was 5% and 12.5% on

based Exide Dealer indicated thatthe 150Ah segment for Exide have been well received in the market and have been competing

of luminous. Similarly a north India based SF sonic dealersegment has been receiving good demand and

Exide has been aggressive in terms of dealer additions and many new dealers have been appointed by the company. Channel checks indicated that many

lti brand dealers that had earlier moved away from the Exide brand have been revived by the company. This trend is positive from a long term volume growth perspective as a stronger


2 years. Inverter batteries have a life of 3life of 3- 5 years and come with a warranty of




implementation of GST, the scenario has changed in favour of organized players. Most of the dealers indicated that few local branded inverter batteries have virt

narrowing pricing differential between branded and local ). An interaction with a dealer

dealing in local brands. The GST on inverter is 18% whereas GST on inverter batteries is at 28%. Earlier, the VAT on inverter was 5% and 12.5% on

based Exide Dealer indicated thatthe 150Ah segment for Exide have been well received in the market and have been competing

of luminous. Similarly a north India based SF sonic dealer alsosegment has been receiving good demand and

aggressive in terms of dealer additions and many new dealers have been appointed by the company. Channel checks indicated that many



2 years. Inverter batteries have a life of 35 years and come with a warranty of

A clear shift seen towards the organized segment: During our EXIDE IC note, we had mentioned that in the automotive segment largely in the commercial vehicle



implementation of GST, the scenario has changed in favour of organized players. Most of the dealers indicated that few local branded inverter batteries have virtually vanished given the

narrowing pricing differential between branded and local a dealer involved in the sale


Exide Industries

based Exide Dealer indicated that new launches in the 150Ah segment for Exide have been well received in the market and have been competing

also indicated that the segment has been receiving good demand and



alers indicated healthy demand for inverter batteries in the previous quarter. We were able to gauge the replacement cycles of all major product lines. Most dealers indicated that the life of the machine and battery would vary based on the usage patterns and the amount of load that it is subjected to. Inverter machines have a product life of 4- 6 years on an

2 years. Inverter batteries have a life of 3-4 years and come 5 years and come with a warranty of

: During our EXIDE IC note, we had mentioned that in the automotive segment largely in the commercial vehicle

ignificant opportunity to be taken away from the unorganized segment and the transition was visible on ground. Similar, to the automotive segment, we have inferred from

with inverter battery dealers that the presence of unorganized players% of the industry was unorganized). However, post the

implementation of GST, the scenario has changed in favour of organized players. Most of the ually vanished given the

narrowing pricing differential between branded and local involved in the sale of certain


Exide Industries

new launches in the 150Ah segment for Exide have been well received in the market and have been competing

indicated that the segment has been receiving good demand and



alers indicated healthy demand for inverter batteries in the previous quarter. We were able to gauge the replacement cycles of all major product lines. Most dealers

nd the 6 years on an

4 years and come 5 years and come with a warranty of

: During our EXIDE IC note, we had mentioned that in the automotive segment largely in the commercial vehicle

ignificant opportunity to be taken away from the unorganized segment and inferred from players was

% of the industry was unorganized). However, post the implementation of GST, the scenario has changed in favour of organized players. Most of the

ually vanished given the narrowing pricing differential between branded and local

of certain dealing in local brands. The GST on inverter is

18% whereas GST on inverter batteries is at 28%. Earlier, the VAT on inverter was 5% and 12.5% on

8 Exide Industries

Dealers point to lower TAT and improvement in product quality

Based on our interaction with the dealers pan India for both the brands i.e. Exide and SF Sonic, we understand that the company has taken corrective actions for both the brands and this has helped strengthen its position in the replacement market. We believe that the company has gained momentum across the brands owing to (a) faster turnaround time for warranty claims, (b) digitization of the complaint resolving system (d) significant improvement in after-sales service and support infrastructure, (e) technological upgrades leading to reduced claim ratio.

How Exide changed the warranty claim system to improve TAT

Based on our interaction with dealers, we understand that there has been substantial improvement in the overall TAT compared to last 2-3 years.

� Overhaul of Warranty claim system reduced TAT: As indicated in Exhibit #7, Exide has transformed its service network considerably in the inverter battery division. The company has diluted the role of authorized dealers/distributors in the service network and has started servicing customers directly. In the older system the dealer would return the batteries to the authorized dealer who in turn would return get the batteries replaced by the company. In the new system, the service engineer from Exide can directly replace the batteries in the customers end or direct the customer to the nearest dealer who can replace the battery thereby cutting down the replacement time and reducing bottlenecks in the system This is welcoming step for inverter battery distributors as it reduces the turnaround time of batteries to 2-3 days from 8-10 days earlier.

Exhibit 7: Effective implementation of new system helped improve TAT

In Old System Out

In New System Out

Exide

Exide

Authorised dealer

Authorised dealer

Inverter battery dealer/Humsafar

dealer

Inverter battery dealer/Humsafar

dealer

Customer

(warranty claim battery)

Customer

(warranty claim battery)

Source: Dealer interaction, Centrum Research

� Digitization of complaint process: All customers’ complaints are posted in the online system and dealers can log customer complaints using a toll free number. The service engineers are deployed by Exide and the engineers directly provide on-site warranty at the customer’s location. All service engineers get all the data on the customer and the warranty validity of the batteries before the service call. This data enables the engineers to carry on spare batteries along with them during the service call and replace it on the spot if the battery is defective.

� Increase Support Infrastructure: Dealers have reported marked increases in delivery vans and better logistical support from the company. A Punjab based dealer mentioned that the company now sends its van three days a week compared to once a week 2 years ago.

Exhibit 8:

Company

Exide

Amara Raja

Tudor India

Tata Green

Southern Batteries

Okaya Power

Luminous

HBL Power

Base Corp

Su-Kam

Microtek

True Power

Amco

Key Player Growth YoY (%)

Source: Centrum Research, Industry, Ministry of Corporate Affair, * Rating agencies

Source: Based on Schneider Electric estimates and market research

Exhibit 8: Industry landscape

Company FY2013

60,714

Amara Raja 29,589

India 1,557

Tata Green 2,502

Southern

2,578

Okaya Power 5,548

Luminous 19,339

HBL Power 11,974

Base Corp 8,974

10,177

5,438

True Power 383

2,486

Key Player Growth YoY 25.5%


Source: Based on Schneider Electric estimates and market research

9

Market size for inverter and UPS segments and industry evolution

We understand that the inverter/inverter batteries and the industrial segment accounts for almost ~50% of revenues the industrial segment accounts for ~24% of its overasegment, bulk of revenues (~15%) is accounted by UPS. With the restructuring of business into B2B and B2C, the automotive and inverteraccounts for ~75% of its overall revenues and the B2Brevenues.

While it was quite based on the dealer geographies, we has projected the market size of inverterannually.

Based on the events over the past few years within the power storage segment, we understand that the industry has gone through fair amount of consolidation (as seen in the table below). technology, the inverters have largely shifted to the inverter batteries industry presentatioFY2007 which inched up to Rs50bn in FY2010 and further the market expanded to Rs140bn in FY2015

Industry landscape

FY2013 FY2014

60,714 59,642

29,589 34,367

1,365

2,774

2,378

5,812

19,339 22,681

11,974 12,808

12,497

10,177 8,634

4,199

460

2,467

25.5% 5.5%


Exhibit 9:

Exide Group

AMRJ

Luminous

Microteck & Okaya

V guard

Crompton

Southern Batteries

Base Corporation

Sukam

True Power

HBL Power

Source:

Source: Based on Schneider Electric


We understand that the inverter/inverter batteries and the industrial segment accounts for almost ~50% of Exide’s overall revenues. While the inverter/inverter batteries accounts for 25% of its revenues the industrial segment accounts for ~24% of its overasegment, bulk of revenues (~15%) is accounted by UPS. With the restructuring of business into B2B and B2C, the automotive and inverteraccounts for ~75% of its overall revenues and the B2Brevenues.

While it was quite based on the dealer geographies, we have has projected the market size of inverterannually.

Based on the events over the past few years within the power storage segment, we understand that the industry has gone through fair amount of consolidation (as seen in the table below). technology, the inverters have largely shifted to

inverter batteries industry presentatioFY2007 which inched up to Rs50bn in FY2010 and further the market expanded to Rs140bn in FY2015

Net Revenues (Rs mn)

FY2015 FY2016

68,655 68,536

42,113 46,178

845 648

3,190 3,150

2,573 3,232

5,248 4,982

22,718 25,726

13,301 12,884

1,343

9,275 7,320

4,345 7,832

318 134

1,729 1,255

3.3% 3.5%


Exhibit 9: Product positioning: Competitive landscape

Exide Group

Luminous

Microteck & Okaya

V guard

Crompton

Southern Batteries

Corporation

True Power

HBL Power

Source: Channel Checks, Company, Centrum Research,


We understand that the inverter/inverter batteries and the industrial segment accounts for almost overall revenues. While the inverter/inverter batteries accounts for 25% of its

revenues the industrial segment accounts for ~24% of its overasegment, bulk of revenues (~15%) is accounted by UPS. With the restructuring of business into B2B and B2C, the automotive and inverteraccounts for ~75% of its overall revenues and the B2B

While it was quite challenging to gauge the market size based on the dealer interactions

have managedhas projected the market size of inverter


inverter batteries segment has shifted towards tubular batteries from flat batteries. industry presentations, we comprehend FY2007 which inched up to Rs50bn in FY2010 and further the market expanded to Rs140bn in FY2015

Net Revenues (Rs mn)

FY2016 FY2017

68,536 76,284

46,178 53,172

648 -

3,150 -

3,232 3,310

4,982 5,191

25,726 27,984

12,884 14,072

-

7,320 -

7,832 9,685

134 -

1,255 -

3.5% 9.7%


Product positioning: Competitive landscape

Inverter Machine

Channel Checks, Company, Centrum Research,



revenues the industrial segment accounts for ~24% of its overasegment, bulk of revenues (~15%) is accounted by UPS. With the restructuring of business into B2B and B2C, the automotive and inverteraccounts for ~75% of its overall revenues and the B2B

to gauge the market size interactions alone as the demand and segmentmanaged to apprehend some data

has projected the market size of inverters at 5mn units and size of inverter batteries at 12mn units


segment has shifted towards tubular batteries from flat batteries. comprehend that the inverter and power storage market was at Rs30bn in

FY2007 which inched up to Rs50bn in FY2010 and further the market expanded to Rs140bn in FY2015

FY2017 FY2018

91,863

60,592

-

-

-

-

-

15,929

-

-

-

-

-

-



Inverter Machine

�

�

�

�

�

�

�

Channel Checks, Company, Centrum Research,



revenues the industrial segment accounts for ~24% of its overasegment, bulk of revenues (~15%) is accounted by UPS. With the restructuring of business into B2B and B2C, the automotive and inverter segmentsaccounts for ~75% of its overall revenues and the B2B

to gauge the market size of as the demand and segment

to apprehend some data at 5mn units and size of inverter batteries at 12mn units

Based on the events over the past few years within the power storage segment, we understand that the industry has gone through fair amount of consolidation (as seen in the table below). technology, the inverters have largely shifted to “Sine Wave

segment has shifted towards tubular batteries from flat batteries. that the inverter and power storage market was at Rs30bn in

FY2007 which inched up to Rs50bn in FY2010 and further the market expanded to Rs140bn in FY2015

FY2013

12.9

15.2

0.3

2.6

9.9

3.0

5.7

13.3

13.1

8.1

1.3

2.0

(1.4)


Inverter Batteries



revenues the industrial segment accounts for ~24% of its overall revenue. Within the industrial segment, bulk of revenues (~15%) is accounted by UPS. With the restructuring of business into

segments which forms a accounts for ~75% of its overall revenues and the B2B portion accounts for 24% of its overall

of the inverter and inverter batteriesas the demand and segment

to apprehend some data based on media interviewat 5mn units and size of inverter batteries at 12mn units

Based on the events over the past few years within the power storage segment, we understand that the industry has gone through fair amount of consolidation (as seen in the table below).

ine Wave” inverters from segment has shifted towards tubular batteries from flat batteries.

that the inverter and power storage market was at Rs30bn in FY2007 which inched up to Rs50bn in FY2010 and further the market expanded to Rs140bn in FY2015

EBITDA Margin (%)

FY2014 FY2015

13.7 13.2

16.3 16.7

1.1 (27.9)

3.4 0.8

12.7 11.8

2.8 3.6

7.0 5.1

13.0 11.1

(3.2) 11.4

7.4 7.0

1.7 1.6

1.4 2.4

(3.9) (3.3)


Inverter Batteries

�

�

�

�

�

�

�

�

�

�

�



ll revenue. Within the industrial segment, bulk of revenues (~15%) is accounted by UPS. With the restructuring of business into

forms a part ofaccounts for 24% of its overall

inverter and inverter batteriesas the demand and segments are quite different across

media interviewat 5mn units and size of inverter batteries at 12mn units

Based on the events over the past few years within the power storage segment, we understand that the industry has gone through fair amount of consolidation (as seen in the table below).

inverters from “Square Wavesegment has shifted towards tubular batteries from flat batteries.


EBITDA Margin (%)

FY2015 FY2016

13.2 14.8

16.7 17.8

(27.9) (32.8)

0.8 (0.3)

11.8 11.0

3.6 3.5

5.1 8.5

11.1 10.8

11.4 -

7.0 3.3

1.6 2.8

2.4 2.7

(3.3) (13.2)

UPS Machine

�

�

�

�

�

�

�

Exide Industries




part of the B2C channel accounts for 24% of its overall

inverter and inverter batteries industryare quite different across

media interviews where Luminous at 5mn units and size of inverter batteries at 12mn units

Based on the events over the past few years within the power storage segment, we understand that the industry has gone through fair amount of consolidation (as seen in the table below). Further, in terms of

Square Wave” inverters and segment has shifted towards tubular batteries from flat batteries. Based on so


FY2016 FY2017 FY2018

14.2

16.0

-

-

-

3.5

9.2

10.3

-

(1.9)

3.4

-

-

UPS Machine UPS Battery

�

�

�

�

�

�

�

Exide Industries



B2C channel accounts for 24% of its overall

industry are quite different across

Luminous at 5mn units and size of inverter batteries at 12mn units

Based on the events over the past few years within the power storage segment, we understand that the Further, in terms of

inverters and Based on some


FY2018

13.5

14.6

-

-

-

-

-

7.9

-

-

-

-

-

UPS Battery

10 Exide Industries

Consolidation – a key theme in the battery industry

As we highlighted earlier in our initiating coverage note, the battery industry has largely been dominated by few players and it is increasing difficult for smaller players to survive and they are moving out of the system. Our thesis can be further evidenced by some recent M&A activity In the sector like a) Exide acquiring Tudor India which is Indian subsidiary of Exide technologies US, b) Su-Kam had been referred to NCLT for bankruptcy proceedings by SBI in November 2017 c) Schneider electric acquiring the Luminous brand in India. We believe all these transactions are pointing to the trend as to how only strong and powerful players are surviving in the industry and they are continuously further consolidating their presence in the market.

Exhibit 10: Consolidation evident amongst inverter battery players

Date Company Name Buyer/Lender Seller(s) Deal Value($ mn)

2018-06-25 Tudor India Pvt. Ltd., Gujarat Plant Exide Industries Ltd. Tudor India Pvt. Ltd. -

2017-01-24 Luminous Power Technologies Pvt. Ltd.

Schneider Electric Industries SA - 139.25

2012-03-13 Kevin Power Solutions Ltd., Home Inverter Business

Exide Industries Ltd. Kevin Power Solutions Ltd. 10.00

2011-05-30 Luminous Power Technologies Pvt. Ltd.

Schneider Electric Industries SA ARIA Investment Partners III LP, Clean Resources Asia Growth Fund, L.P.

325.47

2009-07-14 Tritronics India Pvt. Ltd. Luminous Power Technologies Pvt. Ltd. - -

Source: MCA

UPS segment: To register steady growth driven by higher digitization

The commercial UPS segment is estimated at ~Rs24bn and is expected to increase to Rs29bn by FY2020E. EXIDE and AMRJ together control ~80% of the UPS market resulting into a virtually duopoly market. The share of imports was higher few years back and has gradually reduced to ~10% from ~25% in FY2016 due to higher tax incidence making it unviable and shift of preference by OEMs towards better after-sales service, timely delivery and customized requirements. This has further ensured strong growth for the commercial UPS segment.

Based on our interaction with industry experts and commentary from EXIDE and AMRJ management, we expect UPS segment to register a steady growth of 10-12%.

Growth in the Commercial UPS segment is traditionally driven by IT hardware business growth (primarily servers), e-commerce, power backups and addition to ATM network of banks. However, new opportunities such as smartphones, social networking platforms, cloud applications and smart city projects have resulted in increased usage of data and need for data centres.

Exhibit 11: UPS Industry in India – On a growth path Exhibit 12: Market share (%) of key OEM players in domestic UPS market

Source: Softdisk, Industry, Centrum Research Source: Softdisk, industry, Centrum Research

Based on the industry data, we understand the the organized UPS market in FY2017 stood at Rs57bn. The share of small scale and unorganized players in this segment has reduced from 38% in FY2014 to 21% in FY2018.

The industry has largely shifted towards online UPS which now accounts for more than 91% of the overall UPS industry which comprises of offline UPS and online UPS. AMC on an average accounts for

2527

3535

3946 48

49 50 5054

57

0.0

10.0

20.0

30.0

40.0

50.0

60.0

FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014

FY2015

FY2016

FY2017

Rs bn

15

13

14

9 8 5

3

3

3

27

Schneider

Vertiv Liebert

Numeric

Hitachi

Consul

AVO

Eaton

CyberPower

BPE

Other Majors

11 Exide Industries

6-10% of the overall market. Emerson (now Vertiv Liberty), Numeric and Schneider (Luminous Power Technologies) accounts for almost 42% of the UPS industry.

Valuation and recommendations

AOCF/EV valuation – 10% premium ascribed to historical AOCF/Yield d

We ascribe 10% premium to this average for arriving at the target EV/AOCF multiple, which, in turn, is used for deriving the target EV. We arrive at a target AOCF/EV yield of 3.9% for EXIDE, and hence, the implied EV/AOCF multiple of 25.8x to arrive at our target EV and our TP of Rs276/share for the core business (Exhibit 13).

Exhibit 13: Target price calculations for the core business

Average 5-yr adj. cash flow yield (FY14-18, %) 4.3

Premium (%) 10%

Average 5-yr adj. cash flow yield (FY14-18, %) after premium 3.9

Implied EV/5 yr AOCF Multiple (x) 25.8

Average Operating cash flow after interest (FY16-20E, Rs bn) 9,015

Target Enterprise Value (Rs bn) 232.2

Net Debt (FY20E, Rs bn) (2.7)

Target Market Cap (Rs bn) 234.9

No of shares (mn) 850.0

Target Price (Rs/shr) 276

Source: Centrum Research Estimates

SOTP valuation

We value EXIDE on SOTP basis after assigning Rs43 per share value for its 100% stake in Exide Life Insurance and valuing the core business on our cash flow method as stated above.

Exhibit 14: Target price calculations

Exide: SOTP Valuations FY2020E

Value of Core Business ( Rs/Share) 276

Exide Life Insurance Value ( Rs/share) 43

Total value per share 319

Source: Centrum Research

Upside possibilities

Return of strong growth: Over FY2013-17, EXIDE registered a muted CAGR of 5.9% and 7.3% in net sales and PAT respectively, lower than its competitor AMRJ 15.9% and 14.3% CAGR in net sales and PAT respectively. However, we have seen strong growth returning in FY2018 and on this higher base, we expect the company to deliver strong growth in FY2019E and FY2020E.

Headroom for margin improvement: While we expect the operating performance to improve over FY2019-20E driven by technology upgrade (leading to improvement in product quality and lower warranty cost), strong revenue growth leading to operating leverage and favourable product mix towards high margin replacement market and traction segment, management is targeting to reach 15% margin levels in the near term.

12 Exide Industries

Exhibit 15: 1 year forward EV/EBITDA chart Exhibit 16: 1 year forward P/E chart

Source: Bloomberg, Company, Centrum Research Estimates Source: Bloomberg, Company, Centrum Research Estimates

Exhibit 17: Peer comparison - Domestic

Sector Mkt Cap (Rs mn)

CAGR FY18-FY20E (%) EBITDA Margin (%) PE (x) EV/EBITDA (x) RoE (%) Div Yield (%)

Rev. EBITDA PAT FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E

Exide Industries 2,47,350 13.5 17.9 17.4 13.5 14.2 14.6 26.5 29.5 25.8 14.6 16.6 14.2 13.4 14.8 15.4 1.1 1.0 1.2

Amara Raja Batteries 1,40,852 14.6 18.3 19.7 14.6 15.0 15.5 29.4 25.1 20.9 15.6 13.2 11.4 17.0 17.5 18.1 0.3 0.7 0.8

Source: Company, Centrum Research Estimates Prices as on15 June 2018; NA- Not Available

Exhibit 18: Peer comparison - Global

Sector Mkt Cap (US$ Mn)

CAGR FY18-FY20E (%) EBITDA Margin (%) PE (x) EV/EBITDA (x) RoE (%) Div Yield (%)

Rev. EBITDA PAT FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E

GS Yuasa Corp 1,821 5.0 4.4 7.6 10.2 9.6 10.0 17.7 15.8 13.5 6.6 6.3 6.2 7.8 7.6 7.7 2.0 2.0 2.5

Johnson Controls International plc

34,130 3.5 7.2 9.8 15.6 16.0 16.8 14.2 12.2 10.8 9.9 8.7 8.4 11.4 12.2 12.4 2.6 3.0 3.3

EnerSys 3,185 4.7 6.7 9.4 13.5 13.0 14.0 15.4 14.7 13.4 8.9 9.2 8.3 17.2 16.1 17.2 1.0 0.9 0.9

Zhejiang Narada Power Source Co Ltd

1,600 22.7 31.2 25.5 8.3 8.8 9.5 23.5 13.7 10.2 15.1 9.0 8.9 9.7 11.3 12.9 1.3 2.1 2.6

Leoch International Technology Ltd

144 14.2 14.6 24.9 7.9 7.9 8.0 7.2 3.2 2.5 4.5 3.0 4.1 9.0 10.2 11.2 NA NA NA

Source: Company, Centrum Research Estimates Prices as on 10 August 2018; NA- Not Available

7

10

13

16

19

Aug-11

Feb-12

Aug-12

Feb-13

Aug-13

Feb-14

Aug-14

Feb-15

Aug-15

Feb-16

Aug-16

Feb-17

Aug-17

Feb-18

Aug-18

EV/EBITDA Mean

Mean + Std Dev Mean - Std Dev

12

16

20

24

28

32

Aug-11

Feb-12

Aug-12

Feb-13

Aug-13

Feb-14

Aug-14

Feb-15

Aug-15

Feb-16

Aug-16

Feb-17

Aug-17

Feb-18

Aug-18

P/E Mean

Mean + Std Dev Mean - Std Dev

13 Exide Industries

Quarterly financials, Operating Metrics and Key Performance Indicators

Exhibit 19: Quarterly Financials

Y/E March (Rs mn) 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19

Net Sales 19,253 17,151 19,546 20,902 23,567 22,783 24,594 27,725

Raw Materials 11,791 10,376 12,390 13,251 15,885 14,920 16,032 18,419

Employee Costs 1,320 1,282 1,303 1,430 1,480 1,523 1,538 1,620

Other Expenditure 3,251 3,220 3,334 2,978 3,243 3,514 3,644 3,777

EBITDA 2,891 2,273 2,519 3,243 2,959 2,826 3,380 3,909

Depreciation 506 522 544 563 597 625 674 719

Interest 6 46 0 16 21 9 6 11

Other Income 231 374 309 132 139 111 203 42

PBT before EO 2,611 2,079 2,283 2,796 2,480 2,302 2,903 3,221

Extra-ordinary item 0 0 0 0 -418 0 0 0

PBT after EO 2,611 2,079 2,283 2,796 2,062 2,302 2,903 3,221

Tax 793 564 641 906 706 759 1,007 1,122

Tax rate (%) 30.4 27.1 28.1 32.4 34.3 33.0 34.7 34.8

Reported PAT 1,818 1,515 1,643 1,890 1,356 1,543 1,896 2,099

Adjusted PAT 1,818 1,515 1,643 1,890 1,630 1,543 1,896 2,099

YoY Growth (%)

Revenue 10.4 11.9 10.8 4.0 22.4 32.8 25.8 32.6

EBITDA 13.3 (5.0) (5.4) 3.2 2.3 24.3 34.2 20.6

PAT 17.2 9.4 (6.2) (3.4) (10.3) 1.8 16.1 8.6

Margin (%)

EBITDA 15.0 13.3 12.9 15.5 12.6 12.4 13.7 14.1

Adjusted PAT 9.4 8.8 8.4 9.1 6.9 6.8 7.8 7.4

Source: Company, Centrum Research

14 Exide Industries

Financials

Exhibit 20: Income Statement Y/E March (Rs mn) FY16 FY17 FY18 FY19E FY20E

Revenues 68,536 76,284 91,863 103,890 118,348

Materials cost 42,413 47,077 60,104 66,905 76,216

% of revenues 61.9 61.7 65.4 64.4 64.4

Employee cost 4,670 5,196 5,972 6,688 7,491

% of revenues 6.8 6.8 6.5 6.4 6.3

Others 11,293 13,186 13,380 15,575 17,401

% of revenues 16.5 17.3 14.6 15.0 14.7

EBITDA 10,160 10,825 12,408 14,721 17,240

EBITDA margin (%) 14.8 14.2 13.5 14.2 14.6

Depreciation & Amortisation 1,579 2,063 2,459 2,787 3,547

EBIT 8,581 8,762 9,948 11,934 13,693

Interest expenses 17 43 52 - -

PBT from operations 8,564 8,719 9,896 11,934 13,693

Other income 517 1,039 584 408 408

Exceptional items 0 0 (418) 0 0

PBT 9,081 9,757 10,062 12,342 14,101

Taxes 2,837 2,821 3,103 3,949 4,512

Effective tax rate (%) 31 29 31 32 32

PAT 6,244 6,936 6,959 8,392 9,588

Extraordinary Items - - (276) - -

Reported PAT 6,244 6,936 6,683 8,392 9,588

Adjusted PAT 6,244 6,936 6,959 8,392 9,588


Exhibit 21: Key Ratios Y/E March FY16 FY17 FY18 FY19E FY20E

Growth Ratio (%)

Revenue (0.2) 11.3 20.4 13.1 13.9

EBITDA 11.9 6.5 14.6 18.6 17.1

Adjusted PAT 14.4 11.1 0.3 20.6 14.3

Margin Ratios (%)

EBITDA 14.8 14.2 13.5 14.2 14.6

PBT from operations 12.5 11.4 10.8 11.5 11.6

Adjusted PAT 9.0 9.0 7.5 8.0 8.1

Return Ratios (%)

ROE 14.6 14.6 13.4 14.8 15.4

ROCE 14.0 13.9 13.5 14.5 15.0

ROIC 15.3 15.4 14.5 14.8 15.2

Turnover Ratios (days)

Gross block turnover ratio (x) 3.8 4.6 4.1 3.5 3.2

Debtors 32 30 38 31 31

Inventory 60 73 70 66 66

Creditors 34 32 43 34 34

Cash conversion cycle 58 71 65 63 63

Solvency Ratio (x)

Net debt-equity (0.2) (0.2) (0.1) (0.0) (0.0)

Debt-equity 0.0 0.0 0.0 0.0 0.0

Interest coverage ratio 0.0 0.0 0.0 0.0 0.0

Gross debt/EBITDA 0.1 0.2 0.0 0.0 0.0

Current Ratio 1.4 1.6 1.7 1.8 1.8

Per share Ratios (Rs)

Adjusted EPS 7.3 8.2 8.2 9.9 11.3

BVPS 53.1 58.4 63.4 69.7 76.9

CEPS 9.2 10.6 10.8 13.2 15.5

DPS 2.4 2.4 2.4 3.0 3.4

Dividend payout % 38.9 35.1 36.7 36.1 36.1

Valuation (x)*

P/E (adjusted) 20.2 22.1 26.5 29.5 25.8

P/BV 2.8 3.1 3.4 4.2 3.8

EV/EBITDA 11.5 13.3 14.6 16.6 14.2

Dividend yield % 1.6 1.3 1.1 1.0 1.2

3 Yr Avg AOCF/EV yield % 5.5 4.3 3.6 3.0 3.7


Exhibit 22: Balance Sheet Y/E March (Rs mn) FY16 FY17 FY18 FY19E FY20E

Equity Share Capital 850 850 850 850 850

Reserves & surplus 44,264 48,786 53,043 58,405 64,532

Shareholders' fund 45,114 49,636 53,893 59,255 65,382

Total Debt 1,025 1,702 - - -

Deferred tax liabilities (net) 1,270 1,552 688 1,590 1,802

Non-Current Liabilities 50 58 44 - -

Total Liabilities 47,459 52,948 54,625 60,845 67,183

Gross Block 14,206 19,058 25,339 33,339 41,339

Less: Accumulated Depreciation (1,551) (3,598) (5,756) (8,543) (12,090)

Net Block 12,654 15,460 19,583 24,796 29,249

Capital WIP 1,858 1,414 2,335 2,335 2,335

Net Fixed Assets 14,512 16,874 21,918 27,131 31,584

Investments 26,978 26,739 19,690 19,690 19,690

Inventories 11,335 15,274 17,602 18,759 21,369

Sundry debtors 6,039 6,217 9,446 8,793 10,017

Cash 738 196 872 769 693

Loans & Advances 1,780 2,457 3,725 3,103 3,534

Total Current Asset 19,893 24,143 31,644 31,423 35,613

Trade payables 6,474 6,638 10,787 9,677 11,024

Other current Liabilities 5,109 5,523 5,047 4,512 5,023

Provisions 2,342 2,647 2,793 3,209 3,656

Net Current Assets 5,968 9,335 13,017 14,024 15,909

Total Assets 47,459 52,948 54,625 60,845 67,183


Exhibit 23: Cash Flow Y/E March (Rs mn) FY16 FY17 FY18 FY19E FY20E

Operating profit before WC changes 9,082 9,757 10,062 12,342 14,101

Changes in working capital 5,783 (3,840) (3,563) (1,110) (1,962)

Cash flow from operations 13,398 4,311 5,166 10,928 11,386

Adj. OCF (OCF - Interest) 13,414 4,354 5,219 10,928 11,386

Net Capex (3,953) (4,161) (7,714) (8,000) (8,000)

Adj. FCF 9,462 193 (2,495) 2,928 3,386

Cash flow from investments (11,460) (3,072) (280) (7,995) (8,000)

Cash flow from financing (1,497) (1,781) (4,213) (3,305) (3,462)

Net change in cash 440 (543) 673 (373) (77)


15 Exide Industries

Appendix A

Disclaimer

Centrum Broking Limited (“Centrum”) is a full-service, Stock Broking Company and a member of The Stock Exchange, Mumbai (BSE) and National Stock Exchange of India Ltd. (NSE). Our holding company, Centrum Capital Ltd, is an investment banker and an underwriter of securities. As a group Centrum has Investment Banking, Advisory and other business relationships with a significant percentage of the companies covered by our Research Group. Our research professionals provide important inputs into the Group's Investment Banking and other business selection processes.

Recipients of this report should assume that our Group is seeking or may seek or will seek Investment Banking, advisory, project finance or other businesses and may receive commission, brokerage, fees or other compensation from the company or companies that are the subject of this material/report. Our Company and Group companies and their officers, directors and employees, including the analysts and others involved in the preparation or issuance of this material and their dependants, may on the date of this report or from, time to time have "long" or "short" positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. Centrum or its affiliates do not own 1% or more in the equity of this company Our sales people, dealers, traders and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. We may have earlier issued or may issue in future reports on the companies covered herein with recommendations/ information inconsistent or different those made in this report. In reviewing this document, you should be aware that any or all of the foregoing, among other things, may give rise to or potential conflicts of interest. We and our Group may rely on information barriers, such as "Chinese Walls" to control the flow of information contained in one or more areas within us, or other areas, units, groups or affiliates of Centrum. Centrum or its affiliates do not make a market in the security of the company for which this report or any report was written. Further, Centrum or its affiliates did not make a market in the subject company’s securities at the time that the research report was published.

This report is for information purposes only and this document/material should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any securities, and neither this document nor anything contained herein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. This document does not solicit any action based on the material contained herein. It is for the general information of the clients of Centrum. Though disseminated to clients simultaneously, not all clients may receive this report at the same time. Centrum will not treat recipients as clients by virtue of their receiving this report. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Similarly, this document does not have regard to the specific investment objectives, financial situation/circumstances and the particular needs of any specific person who may receive this document. The securities discussed in this report may not be suitable for all investors. The securities described herein may not be eligible for sale in all jurisdictions or to all categories of investors. The countries in which the companies mentioned in this report are organized may have restrictions on investments, voting rights or dealings in securities by nationals of other countries. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. Persons who may receive this document should consider and independently evaluate whether it is suitable for his/ her/their particular circumstances and, if necessary, seek professional/financial advice. Any such person shall be responsible for conducting his/her/their own investigation and analysis of the information contained or referred to in this document and of evaluating the merits and risks involved in the securities forming the subject matter of this document.

The projections and forecasts described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections and forecasts were based will not materialize or will vary significantly from actual results, and such variances will likely increase over time. All projections and forecasts described in this report have been prepared solely by the authors of this report independently of the Company. These projections and forecasts were not prepared with a view toward compliance with published guidelines or generally accepted accounting principles. No independent accountants have expressed an opinion or any other form of assurance on these projections or forecasts. You should not regard the inclusion of the projections and forecasts described herein as a representation or warranty by or on behalf of the Company, Centrum, the authors of this report or any other person that these projections or forecasts or their underlying assumptions will be achieved. For these reasons, you should only consider the projections and forecasts described in this report after carefully evaluating all of the information in this report, including the assumptions underlying such projections and forecasts.

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This report/document has been prepared by Centrum, based upon information available to the public and sources, believed to be reliable. No representation or warranty, express or implied is made that it is accurate or complete. Centrum has reviewed the report and, in so far as it includes current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. The opinions expressed in this document/material are subject to change without notice and have no obligation to tell you when opinions or information in this report change.

This report or recommendations or information contained herein do/does not constitute or purport to constitute investment advice in publicly accessible media and should not be reproduced, transmitted or published by the recipient. The report is for the use and consumption of the recipient only. This publication may not be distributed to the public used by the public media without the express written consent of Centrum. This report or any portion hereof may not be printed, sold or distributed without the written consent of Centrum.

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This document does not constitute an offer or invitation to subscribe for or purchase or deal in any securities and neither this document nor anything contained herein shall form the basis of any contract or commitment whatsoever. This document is strictly confidential and is being furnished to you solely for your information, may not be distributed to the press or other media and may not be reproduced or redistributed to any other person. The distribution of this report in other jurisdictions may be restricted by law and persons into whose possession this report comes should inform themselves about, and observe any such restrictions. By accepting this report, you agree to be bound by the fore going limitations. No representation is made that this report is accurate or complete.

16 Exide Industries

The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research activity of Centrum Broking and are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a view as of the date of this report and there can be no assurance that future results or events will be consistent with any such opinions, estimate or projection.

This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement with the company or any of its directors or any other person. Information in this document must not be relied upon as having been authorized or approved by the company or its directors or any other person. Any opinions and projections contained herein are entirely those of the authors. None of the company or its directors or any other person accepts any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising in connection therewith.

Centrum and its affiliates have not managed or co-managed a public offering for the subject company in the preceding twelve months. “The company covered in this report may have availed services from Centrum and / or its affiliates and therefore, Centrum or its affiliates may have received compensation from the company covered in this report during the preceding twelve months. Centrum Broking Limited and its affiliated company (ies), their directors and employees may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.”

As per the declarations given by them, Mr. Ajay Shethiya, & Mr. Aditya Iyer, research analyst and and/or any of their family members do not serve as an officer, director or any way connected to the company/companies mentioned in this report. Further, as declared by them, they are not received any compensation from the above companies in the preceding twelve months. They do not hold any shares by them or through their relatives or in case if holds the shares then will not to do any transactions in the said scrip for 30 days from the date of release such report. Our entire research professionals are our employees and are paid a salary. They do not have any other material conflict of interest of the research analyst or member of which the research analyst knows of has reason to know at the time of publication of the research report or at the time of the public appearance.

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Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or Centrum policies, in circumstances where Centrum is acting in an advisory capacity to this company, or any certain other circumstances.

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The information contained herein is not intended for publication or distribution or circulation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is prohibited unless otherwise expressly authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and Derivatives Segments” as prescribed by Securities and Exchange Board of India before investing in Indian Securities Market.

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Exide Industries Ltd

17 Exide Industries

Disclosure of Interest Statement

1 Business activities of Centrum Broking Limited (CBL) Centrum Broking Limited (hereinafter referred to as “CBL”) is a registered member of NSE (Cash, F&O and Currency Derivatives Segments), MCX-SX (Currency Derivatives Segment) and BSE (Cash segment), Depository Participant of CDSL,SEBI registered Portfolio Manager and an AMFI registered Mutual Fund Distributor.

2 Details of Disciplinary History of CBL CBL has not been debarred/ suspended by SEBI or any other regulatory authority from accessing /dealing in securities market.

3 Registration status of CBL: CBL is registered with SEBI as a Research Analyst (SEBI Registration No. INH000001469)

Exide Industries

4 ’ have any financial interest in the subject company and nature of such financial interest No

5 have actual / beneficial ownership of 1% or more in securities of the subject company at the end of the month immediately preceding the date of No

6 analyst or his relatives has any other material conflict of interest No

7 d any compensation from the subject company in the past 12 months and nature of products / services for which such compensation is received No

8 Whether the Research Analyst has received any compensation or any other benefits from the subject company or third party in connection with the research report No

9 d as an officer, director or employee of the subject company No

10 Whether the Research Analyst has been engaged in market making activity of the subject company. No

11 Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past twelve months; No

12 Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; No

13 Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the

No

Rating Criteria

Rating Market cap < Rs20bn Market cap > Rs20bn but < 100bn Market cap > Rs100bn

Buy Upside > 20% Upside > 15% Upside > 10%

Hold Upside between -20% to +20% Upside between -15% to +15% Upside between -10% to +10%

Sell Downside > 20% Downside > 15% Downside > 10%

Member (NSE and BSE)

Regn No.:

CAPITAL MARKET SEBI REGN. NO.: BSE: INB011454239 CAPITAL MARKET SEBI REGN. NO.: NSE: INB231454233

DERIVATIVES SEBI REGN. NO.: NSE: INF231454233 (TRADING & CLEARING MEMBER)

CURRENCY DERIVATIVES: MCX-SX INE261454230 CURRENCY DERIVATIVES:NSE (TM & SCM) – NSE 231454233

Depository Participant (DP)

CDSL DP ID: 120 – 12200 SEBI REGD NO. : CDSL : IN-DP-CDSL-661-2012

PORTFOLIO MANAGER

SEBI REGN NO.: INP000004383

Research Analyst

SEBI Registration No. INH000001469

Mutual Fund Distributor AMFI REGN No. ARN- 147569

Website: www.centrum.co.in

Investor Grievance Email ID: [email protected]

Compliance Officer Details: Ashok D Kadambi

(022) 4215 9937; Email ID: [email protected]

Centrum Broking Ltd. (CIN :U67120MH1994PLC078125)

Registered Office Address

Bombay Mutual Building , 2nd Floor, Dr. D. N. Road, Fort, Mumbai - 400 001

Corporate Office & Correspondence Address

Centrum House 6th Floor, CST Road, Near Vidya Nagari Marg, Kalina, Santacruz (E), Mumbai 400 098.

Tel: (022) 4215 9000 Fax: +91 22 4215 9344

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