Exide Industries Ltd. , is one of the leading battery manufacturers in India. In past five days its share price rose by about 15.09%. However during the Friday trade it declined by 1.37%. In this blog let us explore the reasons for the rise in share price and also about the fundamentals of the company.
About the company:
The company has 9 manufacturing facilities across India out which, 7 factories are for manufacturing batteries and the remaining 2 is for producing home UPS systems. Further the company has a R&D facility at Kolkata, which has been recognized by the Department of Scientific and Research, Ministry of Science and Technology, Government of India in 1977.
The company manufactures batteries for automotive, power, telecom, infrastructure projects, computer industries, railways, mining and defense sectors.
Exide Industries has seven decades of experience in the field.
The company has a strong global presence which is spread across fifty plus countries.
Reasons for rise in Exide share price :
Firstly, the shares saw a rise in price when the non-binding MoU was signed by its wholly-owned subsidiary Exide Energy Solutions with Hyundai Motors and Kia Corporation for production of EV batteries in India.
The second reason is the rise in target price by Morgan Stanley. Morgan Stanley set its target at Rs. 485.
The were the main reasons for the sudden hike in prices of Exide shares. It is to be noted that, the stock gave a multi bagger return in the past one year.
Fundamentals of the company:
The company commands a market cap of Rs 39,249 crores as on 18th April, 2024. The company's stock P/E is at 45. The ROCE is at 10.2% and ROE is 7.28%. The company has a lower debt-to-equity of just 0.06.
So fundamentally it is strong. From the technical point of view the company's RSI is at Rs. 90.2. Also, the price to book value is 3.11. Further, the operating profit margins[OPM]and also the sales were almost flat over the past 3 years. [All the ratios discussed in this para and the above para are from Screener website as on 18th April]
However, the new MoU is expected to increase its sales. Also, the company has acquired a 26% stake in Clean Max Arcadia Pvt Ltd, which allows the company [Exide Industries] to reduce its expenses by adopting renewable energy. This can help the company to increase its OPM due to decline in operating expenses.
Probably this must be the reason why even Morgan Stanley has raised its target.
Should we invest in Exide?:
People say that, "whenever there is a gold rush people selling shovels make money".
We all are aware that we are the beginning of an EV revolution in India and also in other countries. So undoubtedly the demand for batteries, chargers, semiconductor, etc., would rise. So, the company has a good business atleast for next 5 years for sure. Further, the company is also fundamentally strong with very low debt-to-equity ratio even being a capital and asset intensive company.
I still find it as a good investment option but only for long-term. These shares might not give huge profits in a short span. So this company is suited for long term investment atleast for 2 to 3 years.
Since I said about the long-term investment there is no need to speak about its technicals. However for a trader, it is important to note that the RSI is very high [as shown by Screener website]. So it may correct mildly in a short period.
However, donot consider this analysis as an advise for buying or selling this stock. This blog article is only for knowledge sharing purposes. So I request readers to do their own research before investing in any stocks.
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