Exide Industries shares drop to 5-month low as analysts cut target price post Q2 results

Stock Market Today: Extending their weak performance to the second consecutive day following the Q2 results announcement, shares of Exide Industries, a leader in energy storage and management solutions, fell by another 2.5% in today’s trading, reaching a five-month low of ₹434 per share. This decline brings the total cumulative drop in two days to 5.2%.

On Monday, the company released its Q2FY25 results, which came in below Street estimates, prompting analysts to lower their target prices for the stock. Global brokerage firm Citi revised its price target for Exide to ₹540 per share, down from an earlier target of ₹610.

"The second-quarter performance reflected slightly lower revenue and higher selling, general, and administrative (SG&A) expenses compared to our expectations, said Citi.

Domestic brokerage firm Kotak Institutional Equities cut its FY2025-27 standalone EPS estimates by 3-5% on lower auto volumes and EBITDA margin assumption. It expects the company to deliver steady performance in the near term, led by growth in the lead acid business, driven by replacement and select industrial segments.

However, it anticipates that a slowdown in the OEM segment will weigh on overall volume growth. Additionally, Kotak believes the company’s lithium battery (LiB) business will scale up in the coming years, however, profitability and return ratios are expected to remain under pressure due to higher capital expenditure requirements and the commoditised and B2B nature of the business.

The brokerage has maintained its 'sell' rating on the stock and has reduced the price target to ₹300 per share, down from the previous target of ₹315.

Morgan Stanley maintained its overweight rating on the stock with a target price of ₹538 apiece, noting that the second-quarter results were weaker than its estimates. It expects Exide's revenue growth to catch up in the second half of FY25, believing the company will benefit from economies of scale and momentum in its new energy business, which supports the brokerage's positive outlook.

Nomura reiterated its 'buy' rating on Exide with a target price of ₹589 apiece. 

Q2 earnings snapshot

The company's revenue from operations grew by 4% year-on-year (YoY) to ₹4,267 crore in Q2 FY25. EBITDA remained flat at ₹484 crore, resulting in a margin of 11.3%. Profit after tax came in at ₹233 crore in Q2 FY25, up from ₹287 crore in the same period last year.

The company's performance was affected by excess channel inventories for auto OEMs, which dampened demand across the automotive sector. In contrast, the two-wheeler and four-wheeler replacement markets exhibited healthy demand.

Additionally, the industrial UPS and solar segments enjoyed strong demand momentum during the quarter. However, the demand scenario in the home UPS segment was soft, largely due to the early onset of monsoons.

The export market demand has been encouraging, and the company is taking strides by entering new geographies and strengthening its position in existing ones. During the quarter, it invested ₹250 crore in EESL-Li-ion, its cell manufacturing subsidiary (further ₹100 crore invested in Oct’24), bringing the total investment to date to ₹2,852.24 crore, as per the company Q2 earnings filing. 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.