Battery stocks trail indices

Battery stocks have under-performed the broader indices in the last one month. Analysts point out that investor sentiment will be hit as the costs of raw materials such as lead, that is used for making automobile batteries, is on the rise.

The investors are also turning cautious towards battery manufacturers, as the rising interest rates are likely to impact the demand for commercial vehicles and two-wheelers.

The stock of Amara Raja Batteries has been more or less flat in the last one month as compared with a 6 per cent rise in the BSE Mid-Cap Index. Eveready Industries declined 14.8 per cent, while Exide Industries rose 7.4 per cent during the period.

The raw material costs account for 55-60 per cent of the net sales. Lead has gained 11.8 per cent on the LME in the last one month and is currently quoting at $2325. However, inputs such as zinc has eased about 5 per cent.

The rising input costs had adversely affected the performance of Exide Industries in the March 2007 quarter. Its operating profit margins declined 40 basis points y-o-y to 14.35 per cent.

However, analysts point out that investor sentiment towards Exide has been strong as it purchased 49.13 per cent of ING Vysya Life Insurance in mid-2005.

Meanwhile, consumer battery maker Eveready Industries' operating profit margin fell 900 basis points y-o-y to 1.3 per cent in the last quarter due to the higher raw material costs.