Brokerages Remain Cautious On Exide As Q1 Results Disappoint, Shares In Red

Exide’s share price was in the red on Wednesday after the company’s June-quarter results missed street expectations.

What Happened: Exide Industries reported a net profit of ₹279.6 crore for the quarter, marking a 15.5% increase from ₹242 crore in the same quarter last year. Revenue for the quarter rose 6% year on year, reaching ₹4,312.8 crore.

Brokerage Reactions: Nuvama maintained its “hold” rating on the stock, cutting the target price to ₹550 from ₹570. The brokerage said that the company’s June quarter earnings missed its estimates on revenue, EBITDA and net profit.

The analysts added that they were cautious on the stock given execution risks, high valuation and the fact that it did not receive production-linked incentives.

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Kotak Securities also maintained its “sell” rating for the stock with a price target of ₹315. The analysts said that while the company is well-positioned to benefit from the growing demand for lithium-ion batteries, there are concerns about profitability and return ratios.

These concerns stem from higher capital expenditure requirements, the evolution of the business from business to consumer to business to business — where pricing power is limited — and the commoditised nature of the industry.

Motilal Oswal reiterated its “neutral” rating on the stock with a target price of ₹480. The brokerage said that the company’s June quarter results were disappointing “due to a weak product mix and lower other income impacting overall profitability.” As per the brokerages, these factors led to the company’s EBITDA and net profit missing its estimates.

Price Action: Exide’s share price was down 1.22% to trade at ₹525.20 in early trade on Wednesday.

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