On Wednesday, Citi maintained a Buy rating on Exide Industries Ltd. (NS:EXID:IN), while reducing its price target to INR540.00 from INR610.00. The adjustment follows Exide's second-quarter fiscal year 2025 results, which did not meet expectations due to slightly lower revenue and higher selling, general, and administrative expenses than anticipated.
Management at Exide Industries noted robust demand in the replacement automotive and industrial UPS & solar segments, while identifying weaknesses in the home UPS segment, attributed to the early onset of monsoons, and in the auto original equipment manufacturer (OEM) segment, which suffered from excess channel inventory.
In response to the observed revenue softness and rising costs, Citi has revised its earnings estimates downward. However, the impact on earnings was somewhat alleviated by slightly improved gross margins. The target price-to-earnings (P/E) multiple for Exide's core business has also been reduced to 21 times from the previous 22 times, based on fiscal year 2026 estimates.
The new sum-of-the-parts (SOTP) based target price reflects a decrease to INR540 from INR610. While the Buy rating is retained, Citi is looking for more clarity on core demand trends and potential details about client onboarding for Exide's lithium-ion cell manufacturing plant before making further assessments.
InvestingPro Insights
While Citi has adjusted its outlook on Exide Industries Ltd. (EXID:IN), InvestingPro data provides additional context to the company's performance. Despite the recent challenges noted in the Q2 FY2025 results, Exide has demonstrated resilience in certain areas. The company has maintained a strong 1-year price total return of 4.94%, outperforming its 3-month return of 9.77%. This suggests that while short-term fluctuations exist, Exide has managed to deliver value to shareholders over a longer period.
InvestingPro Tips highlight Exide's position as a prominent player in the Automobile Components industry, which aligns with the company's strong presence in the automotive and industrial segments mentioned in the article. Additionally, Exide has maintained dividend payments for 18 consecutive years, indicating a commitment to shareholder returns even during challenging periods. This consistency may provide some reassurance to investors concerned about the recent earnings miss.
The company's ability to operate with a moderate level of debt, as noted by InvestingPro, could be particularly relevant given the current focus on costs and margins. This financial prudence may allow Exide more flexibility in navigating the market challenges described in the article, such as the softness in the home UPS and auto OEM segments.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into Exide's financial health and market position. These additional tips, along with real-time metrics, can help investors make more informed decisions in light of the recent analyst adjustments and market conditions.
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