EXIDEIND - Exide Industries Ltd. Share Price

In the earnings call for Q4 FY 2024-25, Exide Industries management provided an optimistic outlook for the company's future. Key management highlights indicated that about 75% of the business achieved double-digit growth, driven mainly by the mobility aftermarket, solar, and IUPS sectors. Despite facing headwinds in the automotive OEMs, telecom, and home inverter segments, the company recorded a modest sales growth of 4% year-on-year and 8% quarter-on-quarter.

Management noted that while profitability was affected by increased input costs"”particularly due to a surge in antimony prices, which increased from $11,000 to $60,000 per ton"”they managed to maintain an EBITDA growth of 4% sequentially. They emphasized that despite the tough macro environment, the balance sheet remained strong with zero debt and robust cash flow generation.

Looking ahead to FY '26, management expressed confidence in the positive outlook across most business verticals within the lead-acid segment, benefiting from an advanced product portfolio and a pan-India distribution network. The company has also begun significant investments in lithium-ion cell manufacturing, with a total equity investment of INR 3,602 crores expected to bolster operations as commercial production starts later this year.

Key forward-looking points included:

1. The company achieved 75% double-digit growth in parts of the business.
2. Future plans involve a strong push in the home inverter market, with new product launches targeting underserved segments.
3. Continued investment in lithium-ion cells, expecting commercial production to begin this year, with a range of commitments secured from major OEMs.
4. Management expected to mitigate previous losses from antimony price increases through ongoing price adjustments and operational efficiencies.

Overall, the management conveyed a positive sentiment for recovery and growth in the upcoming fiscal year.

Key Questions and Answers from the Earnings Call Transcript:

1. Question: Do you think the weakness in the home inverter market is short-term or indicative of structural changes?
Answer: Thank you for your question, Pramod. The home inverter business faced constraints due to its past association with the automotive SBU, relying on the automotive network for distribution. We have now separated this business to build its own independent network. Early monsoon season impacted demand, but recent performance shows improvement. Our new initiatives, such as RP Home, target fresh markets. We maintain our leadership in inverter batteries despite recent declines.

2. Question: Can you elaborate on the traction in various cell formats for EV manufacturing, and any updates on the Hyundai MOU?
Answer: Our project includes multiple formats: two lines for cylindrical and two for prismatic cells, showing traction in both segments. We're in advanced negotiations with leading OEMs for both 2-wheelers and some 3-wheelers. The binding agreement with Hyundai remains active, and product development is underway, reinforcing our commitment to diverse applications in EVs.

3. Question: What commitments have you secured for the lithium-ion business, and when do you expect commercial production to begin?
Answer: We are engaged in several stages with various clients, from MOUs to ongoing pack manufacturing with outsourced cells. Commercial production is anticipated this fiscal year, though initial production might be staggered due to homologation processes with OEMs, which takes 4-5 months post-trial production. We expect significant customer interest because of local cell sourcing.

4. Question: How has the sharp rise in antimony prices impacted your margins, and what are you doing to mitigate this?
Answer: Antimony prices surged from $11,000 to $60,000 per ton, leading to an INR 50 crore negative impact in Q4 even after price adjustments. Going forward, we are implementing regular price increases to recover costs and anticipate stabilization in prices. Our negotiation with customers on index-based pricing has also gained traction, allowing for smoother adjustments.

5. Question: What is the expected margin trajectory given your current cost-saving initiatives?
Answer: In Q4, our EBITDA margin was close to 13%. With the transition to punched grid technology for 2-wheeler batteries and improved operational efficiencies, we anticipate reductions in both material and manpower costs. Additionally, automation will enhance quality and consistency, further supporting margin expansion. As operations transition, we expect stronger margins moving forward.

6. Question: What growth do you project for your lead-acid business, given last year's 4% growth?
Answer: The varied performance across segments showcased both strengths, like double-digit growth in 4-wheeler aftermarkets and substantial growth in solar, with a 25% increase. Challenges arose from the telecom downturn and supply chain issues transitioning to punched grid technology. We expect aggressive growth in motorcycles moving forward, indicating a more promising outlook for this fiscal year.

7. Question: Regarding lithium-ion cell pricing and margins, what can you expect in terms of profitability at different utilization levels?
Answer: At this early stage, predicting precise margins is complex due to initial yields and potential scrap rates typical of new manufacturing. Once we reach ~80% utilization, we will evaluate profitability, factoring in adjustments and production efficiencies. Current yields and cost structures will influence our profitability assessments significantly in the initial phase of operations.

This summary captures the major inquiries made during the Q&A session, along with succinct yet comprehensive answers provided by the management team, reflecting the company's current situation and outlook.