Battery Stock Continues Surge After Major Partnership: Why Brokerages Are Divided

Exide Industries’ share price was off to a volatile start on Tuesday morning but regained momentum going up around 2%.

What Happened: Shares of the battery major received a massive bump on Monday after the company announced a major partnership with auto giants Hyundai and Kia. The two companies signed a Memorandum of Understanding (MOU) with Exide Energy Solutions, aiming to produce lithium-iron-phosphate (LFP) cells locally for the Indian market.

Brokerage Reactions: JP Morgan was mighty impressed by the development, maintaining its “overweight” rating for the stock. The analysts also raised the price target to ₹480 from ₹330. The brokerage raised the valuation for Exide’s electric vehicle (EV) battery business from ₹25 per share to ₹173 per share. This adjustment is based on increased confidence following the Hyundai-Kia tie-up, leading to a rise in capacity utilization assumption from 70% to 87.5%.

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The brokerage said that Exide’s ability to secure partnerships with top-tier global original equipment manufacturers (OEMs), alleviates most investor concerns. The analysts suggest that further order wins may be on the horizon as the company continues discussions with various OEMs.

Kotak Securities, on the other hand, remained cautious about the stock. The domestic brokerage firm maintained its “sell” rating for the stock but raised the price target to ₹270 from ₹250.

Kotak analysts said that Exide is well-positioned to capitalize on its partnership with SVOLT and its first-mover advantage in the domestic market. The brokerage in its note, suggests that Exide Industries stands to benefit from Hyundai and Kia’s plans to produce mass-market electric vehicles (EVs) by the years CY25-26E, offering potential gains over the medium term.

However, the analysts caution that the higher capital expenditure intensity and the commoditized nature of the business may exert pressure on return ratios, a trend observed with global battery players.

Furthermore, the analysts highlight that Exide Industries’ valuations remain expensive compared to global battery players.

Price Action: Exide’s share price was up 2.05% to trade at ₹384.90 shortly after market open on Tuesday.

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