Buy Exide Industries, target Rs 180: Bank of America

Bank of America initiates Buy rating on Exide Industries with a target price of Rs 180. The investment thesis is premised on three key drivers: 1) robust domestic demand for new vehicles, 2) rising market share in the after-market by replacing unorganised players, and 3) strong demand for power back-up applications. Exide’s dominance in the OEM segment (77% share) and strong distribution network should support a revenue CAGR of 22%. Pricing power and an increase in captive lead sourcing should ensure profitability remains above the historical average.

In the past, Exide’s profitability was closely linked to global lead price volatility. Over the past few years, the company has capitalised on its leadership position by increasing prices to offset lead price movements. Bank of America values Exide on a sum-of-the-parts basis at Rs180, consisting of a valuation of Rs160/share for the core battery business, and Rs20 per share for its 50% stake in the life insurance joint venture.

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