Exide: Good show

Improved productivity, price hike offset surging price of key input lead.

Exide Industries reported an improved performance in the December 2007 quarter. This performance is attributed to the company's decision to hike prices and the productivity enhancement measures that it undertook to offset the surging prices of its key input "" lead.

The average price of lead was $3,258 per tonne on the LME in the December 2007 quarter as compared with $1,622 per tonne a year earlier.

The measures taken by the company enabled its operating profit to increase by 60.1 per cent y-o-y to Rs 109.2 crore in Q3 FY08 as compared to a 57.7 per cent growth in its net sales to Rs 721.9 crore.

While the auto sector, its key user, has been lacklustre in terms of two-wheelers and commercial vehicle sales this year, Exide's growth momentum was powered by its industrial battery segment as demand from the telecom segment was strong.

As a result, its operating profit margin rose 20 basis points y-o-y to 15.1 per cent in the last quarter. The stock touched a 52-week high of Rs 90.9 during intra-day trades on Monday.

Exide had earlier announced a rights issue in the ratio of 1:15 at Rs 30 per share, aggregating Rs 150 crore and this issue will close at the end of this month.

In contrast, in the September 2007 quarter, Exide's operating profit margin declined 110 basis points y-o-y to 17.5 per cent, given the impact from the average lead price which surged 164 per cent y-o-y to $3,141 a tonne in Q2 FY08.

Going forward, the direction of lead prices will remain crucial. In addition, demand conditions from its key user industry "" the automobile sector, will be important. At Rs 86, the stock trades at 30 times estimated FY08 and 24 times FY09 earnings, including its investment in insurance company ING Vysya Life.

With contributions from Amriteshwar Mathur and Priya Kansara