Battery stocks hit by lead prices

Stocks of battery makers such as Exide Industries and Amara Raja Batteries have underperformed the market over the past fortnight due to surging cost of key input "� lead "� on the London Metal Exchange (LME).

Lead prices have surged approximately 16.7 per cent during the past fortnight on the international exchange to currently $1,795 per tonne (approximately Rs 79,877 per tonne).

This rise in key input cost resulted in the Exide Industries stock gaining barely 2.6 per cent over the past fortnight compared with 7 per cent gain in the BSE Midcap Index.

During this period, Amara Raja Batteries rose 1 per cent. For battery manufacturers, raw materials as a percentage of net sales typically amounts to 54-55 per cent.

Analysts highlight that while these battery makers have long-term contracts for lead in place, but higher spot prices would also push up long-term contract prices at the time of renewal. Higher lead prices benefit key suppliers such as Hindustan Zinc.

To lessen the impact of higher input costs, battery makers have been focussing on improving productivity coupled with an expansion of their marketing network.

This strategy had helped Exide to grow its operating profit margin by 50 basis points y-o-y to 18.6 per cent in the September quarter.