ExideInd Angel 280910

Auto Ancillary
September 2010
Volume ‘Lead’ growth Battery

Strong performance by the battery industry Exide Industries
The ~Rs9,700cr Indian storage batteries sector (as estimated in FY2010) has an CMP Rs158
organised market pegged at around ~Rs7,300cr. Over FY2005-10, the battery Target Price Rs171
sector received a boost with industry revenues recording strong ~30% CAGR and
Recommendation Accumulate
net income registering ~50% CAGR on the back of changing demographics,
which in turn supported the secular growth in consumption in the Indian markets. Market Cap (Rs cr) 13,464
52 Week High/Low 169/87
Growth momentum to sustain
Avg. Daily Volume 367,791
Overall, we estimate the battery sector to register ~19.7% CAGR in revenues over
Reuters Code EXID.BO
FY2010-13. For the battery manufacturing companies in India, auto and
Bloomberg Code EXID@IN
industrial growth remains the key revenue driver. Industrial segment revenues are
estimated to increase at ~19.4% CAGR during FY2010-13, while we expect the
auto battery segment revenues to post a CAGR of ~20% during the mentioned
period. Moreover, we believe that next few years will continue to be an
Amara Raja Batteries
investment phase for these companies, as they are operating at almost ~95%
utilisation levels in the automotive battery segment and around ~75% in the CMP Rs213
industrial segment. Target Price Rs261
Robust volumes, stable margins to drive earnings growth Recommendation Buy

Market Cap (Rs cr) 1,818
Going ahead, we model margins to contract with the LME lead prices estimated
52 Week High/Low 225/131
to increase by around 10% annually, which would gradually be passed on with a
lag effect. We expect Exide Industries (Exide) to outperform Amara Raja Batteries Avg. Daily Volume 79,508
(ARBL) on the earnings front following the increase in the contribution from the Reuters Code AMAR.BO
captive lead smelter to total consumption of lead (almost ~50%). While Exide is Bloomberg Code AMRJ@IN
set to emerge a clear winner with earnings CAGR of ~17% due to cost savings on
raw material front, ARBL is expected to report ~11% earnings CAGR during
FY2010-13.
High returns profile drives higher valuation, caps downside risks

Over the last few years, the battery manufacturers have clocked significant
increase in return ratios on the back of sustained volume growth and high
margins. On an average, these stocks delivered CAGR returns of ~50-60% over
the last five years. We attribute the steady earnings CAGR of ~50-60% as the key
factor behind this outperformance. Over the next couple of years, profitability of
Vaishali Jajoo
the battery manufacturers would continue to be determined by growing demand.
022-4040 3800 Ext: 344
With the industry operating at higher capacity utilisation levels and apparent vaishali.jajoo@angeltrade.com
pricing flexibility would result in RoCE and RoE improving going forward and cap
downside risks. We believe that investing in these stocks at current valuations Yaresh Kothari
would fetch good returns for investors as the consumption theme plays out in
022-4040 3800 Ext: 313
favour of the Indian market. Thus, we maintain an Accumulate on Exide and Buy yareshb.kothari@angeltrade.com
on ARBL.
Valuation Summary
Rating CMP Target Price P/E (x) P/BV (x) EV/EBITDA (x) EV/Sales (x) RoE (%)
(Rs) (Rs) FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
Exide Accumulate 158 171 20.4 17.8 4.9 4.0 11.2 9.5 2.5 2.0 26.4 24.5
ARBL Buy 213 261 11.9 9.2 2.7 2.1 6.8 5.6 1.0 0.8 24.8 25.5
HBL Power* Not Rated 28 - 7.8 6.4 1.2 1.0 5.8 4.8 0.9 0.7 16.0 17.0
Source: C-line, Bloomberg, Angel Research; Note: *Consensus, Market price as of September 20, 2010
Please refer to important disclosures at the end of this report 1

Auto Ancillary
Table of Contents
Industry 3
Strong performance by battery industry 4
Growth momentum to sustain 4
Stable lead price, backward integration helped margin expansion 6
Robust volumes to drive earnings growth 7
Expansion to capture volume growth 7
High returns profile drives higher valuation, caps downside risks 8
Stocks outperform on fundamental grounds – Exide excels 9
Exide re-rates on superior performance 10
Exide - ARBL valuation gap contracts 11
Companies 13
Exide Industries - Defensive appeal 14
Amara Raja Batteries - Catching up 30
Annexure 47
Battery Industry - Overview 48
Automotive batteries – Riding secular growth in auto sector 48
Industrial batteries – Growing with economy 53
Key risks 55
September 2010 2
Auto Ancillary
Industry
September 2010 3
Auto Ancillary
Strong performance by the battery industry

The ~Rs9,700cr Indian storage batteries sector (as estimated in FY2010) has an
organised market pegged at around ~Rs7,300cr. Over FY2005-10, the battery
sector received a boost with industry revenues recording strong ~30% CAGR and
net income registering ~50% CAGR on the back of changing demographics,
which in turn supported the secular growth in consumption in the Indian markets.
Exhibit 1: Indian battery market – Growth trend Exhibit 2: Battery industry’s revenue break-up
(%) Revenue growth (%) Net income growth (%) Automobile Industrial
Operating margin (RHS) 100%
80 76 25
70 65
57 20 80% 41 40
60 50
50 15
40 29 30 60%
29
30 21 24 22 10
18 16 18 19 20
14 16
20 40%
7 5
10 60
59
0 0
20%
FY08
FY09
FY10
FY11E
FY12E
FY13E
FY01-10*
FY05-10*
FY10-13E*
0%
FY09 FY10
Source: Industry, Company, Angel Research; Note : * CAGR Source: Industry, Company, Angel Research
Growth momentum to sustain

The organised battery sector recorded a CAGR of ~14.1% during FY2008-10
aided by the ~10.2% and ~18.8% CAGR registered by the automotive and
industrial batteries segments respectively, during the mentioned period. For the
battery manufacturing companies in India, auto and industrial growth remains the
key revenue driver. Going ahead, the industrial segment revenues are estimated to
increase at ~19.4% CAGR over FY2010-13, while the auto battery segment
revenue is estimated to post a CAGR of ~20% during the period. Overall, we
estimate the battery sector to register ~19.7% CAGR in revenues over the
mentioned period.
Exhibit 3: New vehicle sales, increasing vehicle population and healthy industrial growth drives battery demand
CAGR CAGR
Particular FY08 FY09 FY10P FY11E FY12E FY13E
FY2008-10 FY2010-13E
New OEM vehicle volume ('000 units) 10,370 10,732 13,155 15,008 16,603 18,258 12.6 11.5
yoy growth (%) 3.5 22.6 14.1 10.6 10.0
Vehicle population* ('000 units) 99,626 106,888 115,759 125,704 136,860 149,549 7.8 8.9
yoy growth (%) 7.3 8.3 8.6 8.9 9.3
Batteries Volume
Automotive volume (mn units) 30.7 35.0 40.6 47.9 54.7 60.4 15.0 14.1
yoy growth (%) 14.0 16.1 18.0 14.0 10.5
OEM volume (mn units) 10.1 11.1 13.4 15.8 17.5 19.0 15.1 12.5
yoy growth (%) 9.9 20.4 18.4 10.5 8.8
Replacement volume (mn units) 20.6 23.9 27.3 32.1 37.2 41.4 15.0 14.9
yoy growth (%) 16.0 14.1 17.8 15.7 11.3
Industrial volume (mnAH) 2,220 3,071 3,625 4,119 4,782 5,517 27.8 15.0
yoy growth (%) 38.3 18.0 13.6 16.1 15.4
Source: Industry, SIAM, Company, Angel Research; Note: *Projected
September 2010 4
Auto Ancillary
We expect the auto original equipment (OE) battery volume to register 13-14%
CAGR over FY2010-13 aided by healthy ~12% CAGR in automobile volumes.
Auto replacement demand is expected to post 14-15% CAGR in volumes during
FY2010-13. We believe that sustained auto volume growth has resulted in a large
base for the replacement market. Thus, with a sharp increase in vehicle
population, we see a corresponding pick up in replacement demand. Further,
positive industry (IIP) cycle, increasing demand from railways and UPS segment
would support healthy growth of industrial battery segment.
Exhibit 4: Strong auto, industrial growth to boost battery industry’s revenue

(%) yoy growth ind. battery revenue yoy growth auto battery revenue
45
40
40
35
30
25
25 22
18 18 19 19 20
20 18 17
14
15
10
10 6
5 1
0
FY2009 FY2010 FY2011E FY2012E FY2013E FY08-10* FY10-13E*
Source: Industry, Company, Angel Research; Note : * CAGR
We believe that the Indian battery sector offers an excellent opportunity for
investors to cash in on the strong economic growth and emerging consumerism
theme in India. We expect Exide and ARBL to register robust ~21% and ~23%
CAGR in net sales and ~17% and ~11% CAGR in net profit respectively, during
FY2010-13.
Exhibit 5: Angel’s Battery Universe – Financial Projections

Exide ARBL CAGR FY2010-13E (%)
(Rs cr)
FY2010 FY2011E FY2012E FY2013E FY2010 FY2011E FY2012E FY2013E Exide Amara Raja
Revenue 3,794 4,788 5,682 6,691 1,465 1,871 2,267 2,727 20.8 23.0
EBITDA 892 1,065 1,218 1,388 281 273 327 385 15.9 11.0
PAT 537 659 757 859 167 152 197 227 16.9 10.7
Source: Company, Angel Research
Exhibit 6: Revenue growth trend

(%) Exide ARBL
100
82
80
64
60 54 52
44
34 36
40
26 28 26
22 19 21 19 21 18 20 21 23
17 16
20 12 12 9
0
FY10-13E*
FY11E
FY12E
FY13E
FY00-05*
FY05-10*
FY05
FY06
FY07
FY08
FY09
FY10
Source: Company, Angel Research; Note * CAGR
September 2010 5
Auto Ancillary
Stable lead price, backward integration helped margin

expansion
Stable lead prices and smelter acquisition by industry leader, Exide, helped the
industry clock higher margins in the last couple of years. As a result, the impact of
the fluctuations in the lead prices on margins has reduced in recent quarters
particularly for majors like Exide. The lead smelter acquisition has reduced Exide’s
dependence on imports and purchase of pure lead from the market owing to
which we model it EBITDA margins in the range of 20-22% going ahead. ARBL is
expected to operate at margins of around 14-15% going forward.
Exhibit 7: Sensitivity to Exide’s FY12E EBITDA margin Exhibit 8: Sensitivity to ARBL’s FY12E EBITDA margin
LME Lead prices ($/kg) LME Lead prices ($/kg)
1.9 2.2 2.4 2.6 2.9 1.9 2.2 2.4 2.6 2.9
41.5 34.7 31.6 28.7 26.6 24.7 41.5 23.3 19.9 16.8 14.6 12.9
Rupee-Dollar rate
Rupee-Dollar rate
43.7 32.3 29.3 26.6 25.0 23.0 43.7 21.6 18.3 15.5 13.6 12.4
46.0 26.7 23.9 21.4 20.0 18.8 46.0 20.0 16.9 14.4 12.9 12.1
48.3 28.4 25.7 23.4 22.2 21.6 48.3 18.5 15.7 13.5 12.3 12.0
50.7 24.2 21.7 19.7 18.9 18.6 50.7 17.1 14.6 12.8 12.1 12.2
Source: Bloomberg, Company, Angel Research Source: Bloomberg, Company, Angel Research
Exide procures ~50% of its lead requirement from captive smelters and produces
recycled lead, which gives it 10-15% of cost advantage. Imports constitute ~30%
of its lead consumption. In comparison, ARBL imports around ~60% of its lead
requirements on account of which it operates at lower margins to Exide and is
more sensitive to the changes in the LME lead prices.
Exhibit 9: High inventory levels to stabilise lead prices Exhibit 10: EBITDA margin trend
(USD/tonne) Lead inventory (RHS) Lead prices (LHS) (tonne) (%) Exide ARBL
25 24
5,000 250,000 22 21 21
19
4,000 200,000 20
16 16 17 16
15 15 15 14
3,000 150,000 14 14
15 13
11
2,000 100,000
9
10
1,000 50,000
5
0 0
Aug-01
Aug-02
Aug-03
Aug-04
Aug-05
Aug-06
Aug-07
Aug-08
Aug-09
Aug-10
0
FY05 FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E
Source: Bloomberg, Company, Angel Research Source: Company, Angel Research
Going ahead, we model margins to contract with the LME lead prices estimated to
increase by around 10% annually, which would gradually be passed on with lag
effect.
September 2010 6
Auto Ancillary
Robust volumes to drive earnings growth
We expect Exide to outperform ARBL on the earnings front following the increase in
the contribution from the in-house lead smelter to total consumption of lead
(almost ~50%). While Exide emerges a clear winner in terms of earnings CAGR of
~17% due to cost savings at raw material front, ARBL is expected to report ~11%
earnings CAGR during FY2010-13.
Exhibit 11: Earnings growth trend

(%) Exide ARBL
600 535
500
400
300
174
200
97 101 89 108 81
100 54 61 47
28 14 (15) 23 (9) 15 29 14 15 9 17 11
(15)
0
(0)
(100)
FY10-13E*
FY11E
FY12E
FY13E
FY00-05*
FY05-10*
FY05
FY06
FY07
FY08
FY09
Source: Company, Angel Research, Note * CAGR growth FY10
Expansion to capture volume growth
We believe FY2011 will continue to be an investment phase for these companies,

as they are operating at almost 90-95% utilisation levels in the automotive battery
segment and around 70-75% in the industrial segment. With lower growth in the
telecom battery segment, and sustained momentum in auto battery segment, the
players are building up their auto battery capacities to cash in on the higher
growth in the segment. Over the long run, volume growth opportunity in the auto
battery segment is higher for ARBL, which has 24-27% market share than Exide,
which has 60-65% market share.
Exhibit 12: Exide – Capex and capacity utilisation trend Exhibit 13: ARBL – Capex and capacity utilisation trend
(Rs cr) Capex Capacity utilisation (RHS) (%) (Rs cr) Capex Capacity utilisation (RHS) (%)
400 100 200 100
353
164 161
300 274 75 150 75

252 116
112
90
200 167 50 100 50
130 68
88 100 47
100 25 50 27 25
53
27 9
0 0 0 0
FY05
FY06
FY07
FY08
FY09
FY10
FY11E
FY12E
FY13E
FY05
FY06
FY07
FY08
FY09
FY10
FY11E
FY12E
FY13E
Source: Company, Angel Research Source: Company, Angel Research
September 2010 7
Auto Ancillary
Exhibit 14: Exide – Capex v/s FCF Exhibit 15: ARBL – Capex v/s FCF
(Rs cr) Capex FCF (Rs cr) Capex FCF
800 200 169 164 161
150 112 116
617
90 94
600 100 68
490 47
459 50 27 27 22
9
400 353 370 0
313
274 (5) (2)
252 (50)
194
167 (100)
200 130
88107 100 (93)
53 42 (150) (112)
27 33
(149)
0 (200)
FY05 FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E FY05 FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E
We believe that both the companies are well placed in terms of funding their
expansion plans owing to strong operating cash flow and low debt/equity ratio.
The capacity expansions would broadly be funded through internal accruals.
Exhibit 16: Debt/Equity trend Exhibit 17: Asset turnover trend

(%) Exide ARBL (%) Exide ARBL
1.0 3.5
0.9 3.1 3.1 3.2
2.9 2.9 2.8 2.8
3.0 2.8 2.8
0.8 2.5
2.5 2.3 2.2
0.7 2.0 2.1
1.9
0.6 0.6 2.0 1.7
0.6 1.5
0.5 1.4
0.5 1.5
0.4 1.0
0.3 0.2
0.3 0.2 0.5
0.2 0.2 0.1
0.1 0.0
0.1
0.0 0.0 0.0 0.0
FY05
FY06
FY07
FY08
FY09
FY10
FY11E
FY12E
FY13E
0.0
FY05 FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E
High returns profile drives higher valuation, caps downside risks
Over the last few years, the battery manufacturers have clocked significant
increase in return ratios on the back of sustained volume growth and high
margins. Going ahead, over the next couple of years, profitability of the battery
manufacturers would continue to be determined largely by growing demand.
Further, on the back of higher capacity utilisation levels and apparent pricing
flexibility the high levels of RoCE and RoE would be maintained going forward in
turn capping downside risks.
September 2010 8
Auto Ancillary
Exhibit 18: RoE Exhibit 19: RoCE

(%) Exide ARBL (%) Exide ARBL
40 35 50
33 41
30 31
40 35 37
30 26 33 34
25 25 25 24 25 32 32
22 23 23 28 29 29
20 21 30 26 26
18
20 20 20
12 20 16 17
13
10 5 10
3
0 0
FY05
FY06
FY07
FY08
FY09
FY10
FY11E
FY12E
FY13E
FY05
FY06
FY07
FY08
FY09
FY10
FY11E
FY12E
FY13E
Strong auto and industrial volumes and higher contribution from backward
integration coupled with a significant correction in input costs led to consistent
earnings upgrades driving the outperformance of the stocks. Going ahead too,
with the long-term consumption story of India intact, we expect the companies
(Exide and ARBL) to continue to outperform the benchmark indices.
Stocks outperform on fundamental grounds – Exide excels
On the bourses, over the past ten years, most battery stocks broadly outperformed
the benchmark indices reflecting sustained volume growth, significant margin
expansion and steady earnings growth. Exide in particular registered superior
performance during the period.
Exhibit 20: Exide, ARBL outperform benchmark Exhibit 21: ARBL outperforms on higher earnings growth
Sensex ARBL Exide Sensex ARBL Exide
6,000 2,000
5,000
1,500
4,000
3,000 1,000
2,000
500
1,000
0 0
Dec-06
Jun-09
Jan-09
Aug-08
Apr-05
Mar-08
Apr-10
Oct-07
Nov-09
Sep-05
Feb-06
Sep-10
Jul-06
May-07
Dec-01
Dec-03
Dec-05
Dec-07
Dec-09
Aug-02
Aug-04
Aug-06
Aug-08
Aug-10
Apr-01
Apr-03
Apr-05
Apr-07
Apr-09
Source: Bloomberg, Angel Research Source: Bloomberg, Angel Research
In the recent past, most battery players witnessed a sharp rally and touched their
life-time highs. Leader Exide is perceived as a defensive play (low beta) due to
consistent growth performance, strong cash-flow and prudent execution track
record. Thus, during the economic downturn it not only exhibited significant
strength, but also outperformed the benchmark indices over the last five years.
ARBL followed suit with strong growth in the industrial battery segment (telecom).
Nonetheless, the ARBL stock fluctuated and reflected the growth contraction during
the period due to contraction in demand of telecom batteries.
Over FY2005-10, ARBL has shown relative outperformance to Exide largely owing
to higher contribution from the telecom battery segment. However, the recent
structural shift in the telecom industry has impacted the industrial telecom battery
September 2010 9
Auto Ancillary
business of these companies, wherein the demand for telecom batteries has seen a
sharp correction in the growth rate. This in turn resulted in loss of bargaining
power and lower realisation from the telecom battery segment. As a result,
companies generating higher revenues from the telecom battery segment (ARBL
and HBL) relatively underperformed the market leader, Exide, in the recent past.
Exhibit 22: Absolute and relative performance

CMP (Rs) 1 Month 3 Month 6 Month 1 Year 3 Year 5 Year
Absolute Returns (%)
Exide 158 7.5 23.7 37.0 73.6 163.7 681.1
Amara Raja 213 12.9 21.5 27.5 54.1 121.2 896.0
HBL 28 14.1 (12.2) (19.9) (17.3) (17.2) 7.8
BSE Auto 9,397 5.9 15.5 23.2 42.3 82.9 162.5
BSE Sensex 19,906 8.2 13.3 13.2 18.9 21.8 134.2
Relative Returns v/s Sensex (%)
Exide 158 (0.7) 10.4 23.8 54.7 142.0 546.9
Amara Raja 213 4.7 8.2 14.3 35.2 99.4 761.8
HBL 28 5.9 (25.5) (33.1) (36.2) (38.9) (126.4)
BSE Auto 9,397 (2.3) 2.2 9.9 23.4 61.2 28.3
Source: Bloomberg, Angel Research; Note: Market price as of September 20, 2010
On an average, these stocks delivered CAGR returns of ~50-60% over the last five
years. We attribute the steady earnings CAGR of ~50-60% as the key factor
behind this outperformance.
Exide re-rates on superior performance

In terms of their one-year forward P/Es, most companies are trading in line with
their three-year averages, but at a ~20-30% discount to their peak valuations of
FY2007-08. The P/E of Exide has sharply expanded in the past five years on the
back of growth in domestic volumes. We note that, Exide’s multiple expansion and
investment strategies along with backward integration accelerated in FY2008.
Moreover, the company is immune to the fiscal pressures in the developed markets
owing to which there has been high appetite for such defensives during the global
downturn. On the other hand, companies generating higher revenues from
industrial battery segment like ARBL have relatively underperformed due to
reduced demand in telecom segment batteries in the last couple of years.
Exhibit 23: Exide – P/E multiple expands Exhibit 24: ARBL – P/E tracked industry cycle
(x) One-yr forward P/E Three-yr average P/E (x) One-yr forward P/E Three-yr average P/E
Long term average P/E Long term average P/E
30
30
25
25
20 20
15 15
10 10
5 5
0 0
Dec-01
Dec-03
Dec-05
Dec-07
Dec-09
Aug-02
Aug-04
Aug-06
Aug-08
Aug-10
Apr-01
Apr-03
Apr-05
Apr-07
Apr-09
Dec-01
Dec-03
Dec-05
Dec-07
Dec-09
Aug-02
Aug-04
Aug-06
Aug-08
Aug-10
Apr-01
Apr-03
Apr-05
Apr-07
Apr-09
September 2010 10
Auto Ancillary
Exide - ARBL valuation gap contracts

ARBL entered the auto battery segment in 2000 and gained significant market
share, which was captured in the stock performance over FY2001-03 and it traded
at a significant premium to leader Exide. However, simultaneously ARBL also
increased its investments in the industrial (specifically telecom) battery segment,
and the stock tracked the industry cycles. Thus, ARBL’s latest underperformance to
Exide reflected the lower demand for telecom battery segment.
Exhibit 25: Exide, ARBL – Relative P/E performance Exhibit 26: ARBL – Premium/Discount to Exide
(x) AMRL Exide Adj. for Insurance (%) prem./ disc. to Exide Three-yr average Prem/Disc
30 0 Five-yr average Prem/Disc
25 (10)
(20)
20 (30)
15 (40)
(50)
10
(60)
5 (70)
(80)
0
(90)
Dec-01
Aug-02
Dec-03
Aug-04
Dec-05
Aug-06
Dec-07
Aug-08
Dec-09
Aug-10
Apr-01
Apr-03
Apr-05
Apr-07
Apr-09
May-08
Jul-09
Mar-07
Feb-10
Apr-04
Oct-07
Nov-04
Aug-06
Dec-08
Sep-10
Jun-05
Jan-06
Source: Bloomberg, Company, Angel Research Source: Bloomberg, Company, Angel Research; Note: Exide P/E adjusted for
Insurance business
ARBL is currently trading at ~35% discount to industry leader, Exide (adjusted for
insurance business). The gap is due to Exide's leadership position, higher margins
(backward integration through acquisition of lead smelters) and its less
dependence on the telecom battery segment. However, ARBL products have
exhibited strong performance and continuously increased market share through
innovative marketing strategies over the last ten years. ARBL is also in the process
of channelising its efforts to increase market share in the auto battery segment
through capacity, technology, customer and market expansion. Improved
fundamentals are expected to perk up the company’s return ratios compared to its
historical levels. Thus, ARBL’s valuation has increased on sustained volume growth
and earnings visibility, and the valuation gap with Exide has reduced to reasonable
levels of ~35% (as against five year average discount of ~50%).
We believe that investing in these stocks at current valuations would fetch good
returns for investors as the consumption theme plays out in favour of the Indian
market.
Exhibit 27: Global valuation – Relative
(US $mn) P/E (x) P/B (x) EV/EBITDA (x) EV/Sales (x)
Market Cap Sales* PAT* FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
Exide Technologies, USA 371 2,685 (12) 9.0 6.7 - - 4.4 4.0 0.1 0.1
#
Johnson Controls 19,923 28,497 (338) 15.1 12.3 2.0 1.8 9.2 7.5 0.6 0.5
GS Yuasa Corp 2,911 2,666 70 28.8 22.6 2.3 2.2 10.5 8.7 0.9 0.8
Enersys 1,240 1,579 62 11.8 9.9 - - 6.7 5.7 0.7 0.6
Exide Industries 2,946 830 118 20.4 17.8 4.9 4.0 11.2 9.5 2.5 2.0
Amara Raja Batteries 398 321 37 11.9 9.2 2.7 2.1 6.8 5.6 1.0 0.8
HBL Power System 155 243 22 7.8 6.4 1.2 1.0 5.8 4.8 0.9 0.7
#
Source: Bloomberg, Company, Angel Research; Note: Year end September, * Latest financial year-end, Market price as on September 20, 2010
September 2010 11
Auto Ancillary
Exhibit 28: EV/Sales Exhibit 29: EV/EBITDA
(x) Exide ARBL (x) Exide ARBL

15 14
4 3.2
3 11
2.5
3 9
2.0 10
8
2 1.7 7
7
1.2 6
2 5
1.0 5
1 0.8
0.7
1
0 0
FY10 FY11E FY12E FY13E FY10 FY11E FY12E FY13E
Exhibit 30: P/E Exhibit 31: P/CEPS

30 25
25 22
20 20 18
20 18 16
16 15 14
12
11 9 9
9 10
10 8 7
6
5
0 0
Exhibit 32: P/BV Exhibit 33: PEG

8 1.4
1.2 1.2
6 1.2
6 0.9
5 1.0
4 0.8
4 3 3 0.5
3 0.6
2
2 0.4 0.3 0.3
2
0.2 0.1
0 0.0
September 2010 12
Auto Ancillary
Companies
September 2010 13
Auto Ancillary
September 2010
Exide Industries ACCUMULATE

CMP Rs158
Defensive appeal Target Price Rs171
Exide Industries is a leader in the domestic battery industry. Strong brand image Investment Period 12 Months
and capacity addition will enable Exide to cater to the burgeoning demand for
auto and industrial batteries, offering a clear growth visibility going ahead. Stock Info
Moreover, with increased lead sourcing from captive smelters and focus on Sector Auto Ancillary
higher-margin replacement segment will improve profitability and return ratios. At
Market Cap (Rs cr) 13,464
Rs158, the stock is trading at 20.4x FY2011E and 17.8x FY2012E earnings. We
Beta 0.65
estimate Exide to post a 21.1% revenue CAGR over FY2010–13E, leading to a
16.9% earnings CAGR. We maintain Accumulate on the stock with an SOTP 52 Week High / Low 169/87
Target Price of Rs171. Owing to Exide’s defensive appeal and healthy and Avg. Daily Volume 367,791
consistent fundamentals, we value its core operations at 17.3x (20% premium to Face Value (Rs) 1
historical average of 14.4x) its FY2012E earnings at Rs154. We have valued BSE Sensex 19,906
Exide’s stake in ING Vysya Life Insurance at Rs11/share on FY2012E NBAP and
Nifty 5,980
have assigned a value of Rs6/share to lead smelters (8x FY2012E PAT).
Reuters Code EXID.BO
Robust demand scenario for automotive and industrial batteries: We expect auto
and industrial battery market to post revenue CAGRs of 20% and 19.4%, Bloomberg Code EXID@IN
respectively, over FY2010–13E, driven by strong demand for batteries. As such,
we expect Exide to register revenue CAGRs of 20.9% and 21.7% in auto and
Shareholding Pattern (%)
industrial batteries, respectively, leading to overall gross revenue growth of 21.1%.
Promoters 46.0
Market leader with wider reach and strong pricing power: Exide enjoys a firm
pricing power, owing to its strong brand equity and well-entrenched pan India MF / Banks / Indian Fls 28.0
distribution network. We believe Exide is in a position to leverage its market FII / NRIs / OCBs 14.5
leadership and pricing power to pass on cost increases, thereby improving its Indian Public / Others 11.5
realisation, which is estimated to register a ~6% CAGR over FY2010–13E.
Captive sourcing reduces impact of lead price volatility: Exide expects to increase
lead sourcing from captive smelters to ~70% in FY2012E (~50% in FY2010). We Abs. (%) 3m 1yr 3yr
believe captive sourcing of lead reduces the raw material costs by 10-15%. Thus, Sensex 13.3 18.9 21.8
our sensitivity analysis suggests that every 10% increase in sourcing from the Exide Industries 23.7 73.6 163.7
captive smelters results in EBITDA margins expanding by ~50bp (assuming stable
lead prices).
Capacity expansion to increase volumes: To cater to growing demand, Exide
plans to increase its two-wheeler and four-wheeler battery capacity by 28% and
60%, respectively, with an investment of Rs400cr in FY2011E. With utilisation set
to remain at high levels, we expect Exide to post volume CAGRs of 13.9% and
15.6% in the auto and industrial battery segments, respectively.
Key Financials
Y/E March (Rs cr) FY2009 FY2010 FY2011E FY2012E
Net Sales 3,393 3,794 4,788 5,682
% chg 19.3 11.8 26.2 18.7
Net Profit 283 537 659 757
% chg 14.2 89.7 22.6 14.9
EBITDA (%) 16.1 23.5 22.2 21.4
EPS (Rs) 3.6 6.3 7.7 8.9
Vaishali Jajoo
P/E (x) 44.6 25.1 20.4 17.8
022-4040 3800 Ext: 344
P/BV (x) 10.4 6.1 4.9 4.0
vaishali.jajoo@angeltrade.com
RoE (%) 25.0 31.0 26.4 24.5
RoCE (%) 31.7 40.8 36.6 34.3 Yaresh Kothari
EV/Sales (x) 3.9 3.2 2.5 2.0 022-4040 3800 Ext: 313
EV/EBITDA (x) 23.9 13.7 11.2 9.5 yareshb.kothari@angeltrade.com
Source: Company, Angel Research; Note: Market price as on September 20, 2010

Exide Industries | Auto Ancillary
Investment rationale
Auto and industrial batteries: Robust demand scenario
Exide derives ~69% and 31% of its revenue The automotive and industrial battery segments have been witnessing strong
from the automotive and industrial battery growth post the economic downturn, driven by robust demand-pull on account of
segments, respectively higher auto and industrial production and increased consumer spending. We
expect the auto and industrial battery segments to continue to grow, generating
robust revenue CAGRs of ~20% and ~19.4%, respectively, over FY2010–13E.
Hence, we forecast Exide to register strong revenue CAGRs of 20.9% and 21.7% in
the auto and industrial battery segments, respectively.
Automotive OEM segment
The automotive OEM segment has registered strong sales volume post the
economic downturn, and domestic demand continues to witness a strong traction
across all segments. The prospect for automotive batteries looks encouraging,
supported by the fact that major global automotive players have set up their base
in India due to low production cost and lower penetration levels. We expect
volume growth to be robust and forecast passenger vehicles, commercial vehicles
and two-wheelers to post CAGRs of ~13%, ~12% and ~11%, respectively, in
sales between FY2010–13E, leading to sustainable demand for batteries.
Consequently, Exide, which caters to 65–67% of OEM demand, is set to benefit
from the expected surge in vehicle production over FY2010–13E.
Exhibit 1: Volumes to maintain growth momentum Exhibit 2: Auto battery revenue to register 20.9% CAGR
(mn units) Auto battery volume yoy growth (RHS) (%) (Rs cr) Auto battery revenue yoy growth (RHS) (%)
25 23.3 25 6,000 5,495 60
21.2
20 5,000 4,683 50
18.8
20
3,975
15.8
14.5 15 4,000 40
15 13.2 3,108
11.9 2,905
10 3,000 2,561 30
10
5 2,000 1,668 20
5
0 1,000 10
0 (5) 0 0
FY07 FY08 FY09 FY10 FY11E FY12E FY13E FY07 FY08 FY09 FY10 FY11E FY12E FY13E
Automotive replacement segment
Exide derives 48–50% of its overall The average life of an automotive battery is 3–4 years, after which it needs to be
revenue from the automotive replacement replaced; there could be as much as three battery replacements in a vehicle’s life.
segment Going ahead, demand for replacement batteries is expected to continue to be
buoyant, led by a strong base of vehicles and burgeoning automotive OEM sales.
Exide derives 48–50% of its overall revenue from the automotive replacement
segment. The company has a 60-62% market share in the branded replacement
market. Exide is looking to expand its market share at the cost of unorganised
players, using its excellent sales and distribution network. We believe Exide is well
placed to capitalise on the opportunity going ahead, given a promising outlook for
the replacement market.
September 2010 15
Industrial battery segment
UPS/inverter batteries to drive industrial Demand for industrial batteries surged in last ten years largely owing to favourable
battery demand economic scenario and growth in industrial activity. Further, during FY2007-09,
largely due to significant boom in the telecom sector the segment recorded
substantial jump in volumes. (Telecom sector uses batteries as a backup power
source for telecom towers.) However, due to the slowdown in the telecom space,
we expect demand for telecom batteries to remain subdued. Demand will mainly
be driven by replacement demand for telecom batteries, which have a useful life of
5–6 years.
Exhibit 3: Ind. battery volumes to post a 15.6% CAGR Exhibit 4: ...driving growth in industrial revenue
(mnAH) Ind battery volume (mnAH) yoy growth (RHS) (%) (Rs cr) Ind battery revenue yoy growth (RHS) (%)
2,500 25 3,000 45
2,238
1,992 2,516 40
2,000 20 2,500
1,717 2,117 35
1,450 2,000 1,753 30
1,500 1,324 15
1,170 1,397 25
1,500 1,269
959 20
1,000 10 1,019
1,000 715 15
500 5 10
500
5
0 0 0 0
Industrial battery segment’s revenue to We expect industrial battery demand to be mainly driven by demand from the
post a 21.7% CAGR over FY2010–13E power back-up segment (UPS) and railways. Over the last five years, battery
demand in the UPS/inverter segment has witnessed a 15% CAGR, driven by
large-scale computerisation of banking networks and government departments
and power deficit over the last few years (10.1% in FY2010). We believe demand
for UPS/inverter batteries will continue to grow, as the power demand-supply gap
will continue over the medium term, with deficit to be ~7.0% in FY2013E.
September 2010 16
Market leader with wider reach and strong pricing power
Exide is a dominant player in the automotive battery (OEM and replacement) and
industrial battery segments with market share of 60-65% and 40–45% respectively.
Exide has leveraged upon its brand equity, better quality proposition and wider
reach to consolidate its position in the market, which gives it a superior pricing
power compared to peers. Over the years, Exide has been able to improve its
realisation across the automobile and industrial battery businesses, which has
more than offset the movements in input prices. We expect Exide to continue to
leverage upon its market leadership position and pricing power, which would
enhance the company’s ability to pass on cost increases in the future as well.
Hence, we expect average realisation to grow at a ~6% CAGR over FY2010–13E.
Exhibit 5: Market share across segments Exhibit 6: Average realisation to remain strong
Railways 35 (Rs) Average realisation/unit yoy growth (RHS) (%)
Telecom 30 3,000 50
Cap Lamps 90
2,500 40
Traction 80
UPS/Inverters 40 2,000 30
Power Projects 35
Two Wheelers 55 1,500 20
Branded (Replacement) 62
1,000 10
Auto (Replacement) incl. unorganised 37
Auto (OE) - PV 75 500 0
Auto (OE) 65
0 (10)
(%) 0 25 50 75 100 FY07 FY08 FY09 FY10 FY11E FY12E FY13E
Along with strong brand equity, Exide has a well-entrenched distribution network
across India. The company has close to 38,500 retail outlets for aftermarket sales,
over 9,000 main dealers and 210 hub offices, which the company plans to
increase to 250 by the end of FY2011E and further to 510 by FY2013E. Exide
operates through authorised distributors and dealers who, in addition to selling to
consumers, sell to a tertiary distribution network, which constitutes garages and is
called the ‘Humsafar Partner’ network (~21,970 partners). The company also has
a separate distribution network called the ’C Dealer’ network (~500 dealers) for
heavy commercial vehicles and ‘Kisaan Dealer’ network (~3,197 dealers) for
tractors. On the back of its excellent service and distribution network, which is the
largest among battery manufacturers, Exide continues to penetrate the
replacement market.
September 2010 17
Captive lead sourcing reduces impact of lead price volatility

Exide acquired 100% in Tandon Metals Lead is the key raw material for Exide, accounting for 75–80% of its
in October 2007 and 51% in Leadage raw-material cost. The company acquired two smelters to recycle used lead. This
Alloys in June 2008. In August 2010, helped in reducing the vulnerability of rising lead prices and augmented domestic
the stake in Leadage Alloys was availability of lead for Exide. These acquisitions helped Exide to increase its use of
increased to 100% recycled lead and lead alloys for making storage batteries. This, in turn, reduced
the company's dependence on imported lead in FY2010 to ~32% (~36% in
FY2009).
Total lead supplied by the captive smelter increased to ~50% in FY2010 from
~35% in FY2009. Exide has benefitted from its captive sourcing strategy, as lead
sourcing from captive smelters is 10–15% cheaper compared to market rates.
Margins during FY2010 were substantially higher compared to average margins of
18.1% in FY2007–10.
Exhibit 7: Lead prices v/s EBITDA margin Exhibit 8: Captive lead sourcing benefits Exide
(US $/tonne) Avg. Lead Price (LHS) EBITDA Margin (RHS) (%) (%) Captive consumption EBITDA Margin (RHS) (%)
3,500 30 80 25
3,000 25 70
2,500 20
20 60
2,000
15 50 15
1,500
40
10
1,000 10
30
500 5
20
0 0 5
10
FY11E
FY12E
FY13E
1QFY08
2QFY08
3QFY08
4QFY08
1QFY09
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
0 0
FY07 FY08 FY09 FY10 FY11E FY12E FY13E
Source: Bloomberg, Company, Angel Research Source: Company, Angel Research
Going forward, the company plans to further increase sourcing from its smelters to
~55% in FY2011E and ~70% by FY2012E. Hence, the company is expanding its
lead smelter capacity to 100,000tpa by March 2011. Going ahead, we model
margins to contract with the LME lead prices estimated to increase by around
~10% annually, which would gradually be passed on with lag effect. We expect
Exide to leverage upon its low-cost structure relative to its competitors.
We have assumed a ~10% increase in lead prices in FY2011E, from

~US $1,990/tonne to ~US $2,180/tonne, followed by another ~10% rise in
FY2012E to ~US $2,400/tonne.
September 2010 18
Exhibit 9: Impact of captive sourcing on FY2012E EBITDA margins

Lead price (Rs/kg)
Captive sourcing (%)

114.7 120.7 127.1 133.5 140.1
70 26.1 23.8 21.4 19.1 16.6
60 25.6 23.3 20.9 18.5 16.0
50 25.1 22.8 20.4 18.0 15.5
40 24.7 22.4 19.9 17.5 14.9
30 24.2 21.9 19.4 16.9 14.4
Source: Bloomberg, Company, Angel Research
Our sensitivity analysis suggests that every 10% increase in sourcing from the
captive smelters, EBITDA margins expands by ~50bp (assuming stable lead
prices).
Capacity expansion to increase volume growth
Exide has been operating at ~90% utilisation levels over the past five years. The
company plans to increase its battery capacity with an investment of Rs400cr in
FY2011E to cater to growing demand. Exide plans to increase its two-wheeler
battery capacity to 15.4mn units from 9.6mn units by setting up a new plant at
Ahmednagar, Maharashtra, at a cost of Rs80cr. The company also plans to
increase its four-wheeler capacity to 10.2mn units from 8mn units by FY2011.
Though the electric vehicle (EV) segment in India is still at a nascent stage, the
company wants to be prepared for the opportunity as and when it arises. Hence, it
plans to spend Rs40cr on EV battery capacity over the next 2–3 years.
Exhibit 10: Utilisation to remain at high levels Exhibit 11: Adding capacities to meet demand
(mn units) Installed Capacity Utilisation (RHS) (%) (mn units) FY10 FY11E
45 41.6 100 18
40 37.8 90 16
80 14 60%
35
29.1 70
30 12
24.2 28%
22.7 60
25 10
19.8 50
18.3 8
20
40
15 6
30
10 20 4
5 10 2
0 0 0
FY07 FY08 FY09 FY10 FY11E FY12E FY13E 2-wheeler 4-wheeler
As a result of increased capacity, we believe Exide is well placed to meet the rising
automotive battery demand. We estimate the overall utilisation level to remain at
78–80% in FY2013E. We expect Exide to post volume CAGRs of 13.9% and 15.6%
in the automotive and industrial battery segments, respectively.
September 2010 19
Financial performance
Net revenue to post a 20.8% CAGR over FY2010–13E
We expect Exide to post a 20.8% CAGR in its net revenue over

FY2010–13E, driven by volume growth and improved realisation. Overall, battery
volume (mnAH terms) is expected to grow at a 14.1% CAGR over FY2010–13E.
We forecast realisation to improve at a ~6% CAGR during the same period.
Exhibit 12: 14.1% CAGR in volume over FY2010–13E Exhibit 13: ...will lead to an 20.8% revenue CAGR
(mnAH ) Overall volumes yoy growth (RHS) (%) (Rs cr) Net sales yoy growth (RHS) (%)
7,000 25 8,000 60
5,861 6,691
7,000
6,000 5,296 50
20 5,682
4,675 6,000
5,000 4,788 40
3,949 5,000
4,000 3,475 15
3,794
3,124 4,000 3,393 30
2,721 2,845
3,000 10 3,000
1,870 20
2,000 2,000
5 10
1,000 1,000
0 0 0 0
Exhibit 14: Key assumptions

Y/E March FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E FY2013E
Storage Batteries ('000 units) 17,686 17,996 19,109 21,899 25,977 29,405 32,534
% yoy chg 22.1 1.8 6.2 14.6 18.6 13.2 10.6
Realisation per Battery (Rs) 1,347 1,978 2,206 2,069 2,216 2,324 2,474
% yoy chg 10.8 46.8 11.5 (6.2) 7.1 4.9 6.5
Million Ampere Hours (mnAH) 2,721 3,124 3,475 3,949 4,675 5,296 5,861
% yoy chg - 14.8 11.2 13.6 18.4 13.3 10.7
Total Revenue 2,383 3,606 4,233 4,542 5,769 6,846 8,062
Automotive (Rs cr) 1,668 2,561 2,905 3,108 3,975 4,683 5,495
% yoy chg - 53.6 13.4 7.0 27.9 17.8 17.3
Industrial (Rs cr) 715 1,019 1,269 1,397 1,753 2,117 2,516
% yoy chg - 42.6 24.5 10.1 25.5 20.8 18.8
Other (Rs cr) 0.1 25.5 59.8 36.7 40.8 45.4 50.8
EBITDA to grow at a CAGR of 15.9% over FY2010-13E
Exide’s captive lead sourcing is expected to increase from ~50% in FY2010 to

~70% by FY2013E. We believe this will mitigate the impact of increase in lead
prices to a certain extent. We expect margins to be in the range of 21-22% going
forward. Thus, EBITDA is expected to register a 15.9% CAGR over FY2010–13E.
September 2010 20
Exhibit 15: Lead prices expected to remain stable Exhibit 16: EBITDA margins to stabilise around 21-22%
(USD/tonne) Lead inventory (RHS) Lead prices (LHS) (tonne) (US $/tonne) Avg. Lead Price (LHS) EBITDA Margin (RHS) (%)
5,000 250,000 3,500 25
3,000
4,000 200,000 20
2,500
3,000 150,000 15
2,000
2,000 100,000 1,500 10

1,000
1,000 50,000 5
500
0 0 0 0
Aug-01
Aug-02
Aug-03
Aug-04
Aug-05
Aug-06
Aug-07
Aug-08
Aug-09
Aug-10
FY07
FY08
FY09
FY10
FY11E
FY12E
FY13E
Return ratios expected to remain healthy
We forecast net profit to increase to Rs859cr in FY2013E (Rs537cr in FY2010),

witnessing a 16.9% CAGR over FY2010–13E. We expect return ratios to remain
strong, mainly driven by the increase in asset turnover along with high operating
margins. Exide’s RoE and RoCE are expected to remain high at 24-27% and 34-
37%, respectively, in line with its historical levels on account of higher profitability.
Exhibit 17: Net profit to grow at a 16.9% CAGR Exhibit 18: Return ratios to remain strong
(Rs cr) Net profit yoy growth (RHS) (%) (%) RoE RoCE
45 40.8
1,000 100
40 36.6
900 90 33.1 34.3
31.7 32.3
800 80 35
700 70 30 26.0
600 60 25 29.5 31.0
500 50 25.4 25.0 26.4
20 24.5
22.8
400 40 15
300 30 10
200 20
5
100 10
0
0 0
September 2010 21
Stake in ING Vysya Life valued at Rs11/share
Exide has a 50% stake in ING Vysya Life Insurance Company Limited, a JV with
ING Group, Netherlands. ING Vysya Life Insurance has a ~2% market share
among private players in India. Exide plans to continue investing in this business
and has no plans of selling out in the medium term.
We value Exide’s stake in ING Vysya Life Insurance Company at Rs11/share based
on 15x FY2012E NBAP, with an NBAP margin of ~17% on an estimated annual
premium equivalent (APE) amount of Rs657cr in FY2012E.
Exhibit 19: Valuation of Exide’s stake in ING Vysya Life Insurance

FY2010 FY2011E FY2012E
APE (New business) 628.4 596.9 656.6
NBAP margin (%) 17.0 17.0 17.0
NBAP (Rs cr) 106.8 101.5 111.6
NBAP multiple (x) 15.0 15.0 15.0
Value of Insurance Business (Rs cr) 1,602 1,522 1,674
Exide's Holding (%) 50 50 50
Per Share Value of Insurance Business (Rs) 10 9.5 11
Source: IRDA, Company, Angel Research
Key concerns
Slowdown in demand for automobile and industrial batteries
Exide generates 15–17% of its revenue from OEM sales, which are highly
dependent on off-take in cars, commercial vehicles and two-wheelers. Any decline
in demand due to a slowdown in economic activity or rise in interest rates will have
an adverse impact on automobile demand, which poses a downside risk to our
volume and earnings estimates.
Further, the slowdown in economic activity will have a negative impact on

industrial battery demand as well. Industrial battery demand is expected to remain
subdued in FY2011, mainly due to the slowdown in the telecom segment. The
telecom segment, which contributes 30–35% of industrial battery sales, declined in
FY2010. Going ahead, if the decline in demand is severe, it would negatively
impact our estimates.
Fluctuation in lead prices
Lead and lead alloys are the key inputs and major cost elements in the battery
manufacturing process. Lead accounts for 75–80% of Exide’s raw-material cost.
Although Exide plans to secure the supply from its own smelters, a significant
increase in lead prices will have a negative impact on our earnings estimates.
September 2010 22
Outlook and valuation

We estimate Exide to post a 21.1% CAGR in gross revenue over FY2010–13E,
backed by 20.9% and 21.7% revenue CAGRs in auto and industrial battery
segments. Thus, we expect the bottom line to post a substantial 16.9% CAGR over
the same period. Moreover, Exide's strong brand image has been creating value,
while continuously improving its RoCE, due to better asset turnover on incremental
capacities. We believe Exide will continue to achieve higher return ratios and
margins on the back of its superior pricing power and assuming a stable input cost
scenario. Going ahead, a strong balance sheet and lower debt-equity ratio will aid
the company in sustaining strong cash flows.
At Rs158, the stock is quoting at 20.4x FY2011E and 17.8x FY2012E earnings. We
maintain an Accumulate rating on the stock with an SOTP Target Price of Rs171.
Owing to its defensive appeal and healthy and consistent business fundamentals;
we are valuing the company at 17.3x (20% premium to its historical average of
14.4x) FY2012E earnings at Rs154. We have valued the company’s stake in ING
Vysya Life Insurance at Rs11/share on FY2012E NBAP and have assigned a value
of Rs6/share to lead smelters (8x FY2012E PAT).
Exhibit 20: One-year forward P/E band Exhibit 21: One-year forward P/E chart
(Rs) Share price (Rs) 6x 10x 14x 18x (x) One-yr forward P/E Three-yr average P/E
200 Long term average P/E
30
25
150
20
100 15
10
50
5
0 0
Dec-01
Dec-03
Dec-05
Dec-07
Dec-09
Apr-01
Apr-03
Apr-05
Apr-07
Apr-09
Aug-02
Aug-04
Aug-06
Aug-08
Aug-10
Dec-01
Aug-02
Dec-03
Aug-04
Dec-05
Aug-06
Dec-07
Aug-08
Dec-09
Aug-10
Apr-01
Apr-03
Apr-05
Apr-07
Apr-09
Exhibit 22: One-year forward EV/EBITDA band Exhibit 23: One-year forward EV/EBITDA chart
(Rs cr) EV (Rs cr) 2x 5x 8x 11x (x) One-yr forward EV/EBITDA Three-yr average EV/EBITDA
Long term average EV/EBITDA
16,000 16
12,000 12
8,000 8
4,000 4
0
0
Dec-01
Dec-03
Dec-05
Dec-07
Dec-09
Aug-02
Aug-04
Aug-06
Aug-08
Aug-10
Apr-01
Apr-03
Apr-05
Apr-07
Apr-09
Dec-01
Dec-03
Dec-05
Dec-07
Dec-09
Apr-01
Apr-03
Apr-05
Apr-07
Apr-09
Aug-02
Aug-04
Aug-06
Aug-08
Aug-10
Source: Bloomberg, Company, Angel Research Source Bloomberg, Company, Angel Research
September 2010 23
DCF-based valuation
Given the free cash flow generation going ahead, our fair value for Exide’s core
business, based on the discounted cash flow (DCF) methodology, works out to
Rs166 on a conservative basis. Our model captures most of the concerns present
in the market. We have applied weighted average cost of capital (WACC) of
13.2% and terminal growth rate of 3%.
Exhibit 24: DCF model

Y/E March (Rs cr) FY10A FY11E FY12E FY13E FY14E FY15E FY17E FY19E FY22E
EBIT 811 967 1,110 1,261 1,469 1,705 2,192 2,651 3,528
Depreciation 81 97 108 127 149 171 230 309 405
Change in Work Cap (59) (28) (116) (88) (117) (123) (101) (124) (151)
Capex 100 353 252 274 386 336 450 475 500
Free Cash Flows 459 370 490 617 635 859 1,148 1,486 2,118
Years Discounted - 1.0 2.0 3.0 4.0 5.0 7.0 9.0 12.0
Discount Factor 1.00 0.88 0.78 0.69 0.61 0.54 0.42 0.33 0.23
DCF (2-year forward) 490 545 496 593 618 625 614
Terminal growth rate 3.0%
WACC (@100% Equity and beta* of 0.6) 13.2%
Terminal Value 21,468
PV of terminal value 6,229
NPV of cash flows 5,936
Total value of firm 12,165
Net Debt (1,917)
Equity Value of Firm 14,082
No of Shares (cr) 85.0
Fair Value/Share (in Rs) 166
CMP 158
Upside 4.6%
Source: Company, Angel Research; Note:* Beta based on three year price movement, Market price as on September 20, 2010
Exhibit 25: Sensitivity analysis

Terminal growth rate (%)
2.3 2.5 2.8 3.0 3.3 3.5 3.8
12.0 181 184 186 189 192 195 198
WACC (%)
12.4 174 176 178 181 183 186 189

12.8 167 169 171 173 175 178 180
13.2 160 162 164 166 168 170 172
13.6 154 156 157 159 161 163 165
14.0 148 150 151 153 155 156 158
14.4 143 145 146 147 149 150 152
September 2010 24
Company background
Exide is the largest manufacturer of lead acid storage batteries with manufacturing
presence in India, Sri Lanka, UK, Singapore and Australia. The company
manufactures batteries, ranging from 2.5Ah to 20,400Ah, having applications in
the automotive and industrial segments. Exide has a technological tie-up with Shin
Kobe, Furukawa Battery, Changxing Noble and Thunder Sky Battery. The business
segment of the company comprises automotive batteries (~69% of revenue),
industrial batteries (~30% of revenue) and submarine batteries (1% of revenue).
Exhibit 26: Auto battery segment’s revenue break-up Exhibit 27: Ind. battery segment’s revenue break-up
Others Traction Others
1% 2% 5%
Exports
6%
OEM
26%
Infrastructure
20%
Power back-up
After-market 67%
73%
Exhibit 28: Sectors and customers for automotive and industrial batteries
Automobile
Maruti Suzuki, Tata Motors, Fiat, General Motors, Honda, Hyundai,
Cars
Mitsubishi, Toyota
Commercial Vehicles Tata Motors, Iveco, Ashok Leyland, Piaggio, Mazda
Motorcycle Bajaj Auto, Honda, Yamaha
Tractors Eicher Tractors, John Deere, Mahindra Tractors, New Holland Tractors
Special Purpose Vehicles Caterpillar India, JC Bamford
Industrial
Motive Power (Electric vehicles, mining locomotives, miners' cap India Railways, Macneill & Magor, Godrej, Voltas, Josts, BHEL, Escorts,
lamps) Indian Navy
Fujitsu, Alctel, Siemens, Tata Lucent, BSNL, MTNL, AT&T, Compton
Standby (Power, Telecom, UPS, Inverter)
Greaves, Tata Telecom, Reliance Telecom
Railways(Train lightning, AC, Electric Multiple Units, Diesel Loco
Railways
Starters, Signaling and Telecom
Exhibit 29: Major brands

Automotive batteries Exide, SF Sonic, Standard Furukawa
Industrial batteries Exide, Index, SF, Ceil, Power Safe, Chloride
Exide has a strong sales and distribution network and offers quality customer
service with a pan India presence.
September 2010 25
Exhibit 30: Exide’s dealer and service network Exhibit 31: Distribution network’s strength
Factories
Authorised dealers 13,400
Branches
Outlets 38,500
Government
Main Dealer
After-Sales Staff Humsafar partners 21,970
Institutions
Subdealers/ Retailers
Depot cum service stations 202
Customers OEM Power centre shops 29
Exhibit 32: Key management team

T V Ramanathan MD & CEO
G Chatterjee Director - Industrial division
P K Kataky Director - Automotive division
A K Mukherjee Director - Finance & CFO
S K Mittal Director - R&D
Supriya Coomer Company Secretary, VP - Legal and Administration
Nadeem Kazim Executive VP Human Resource
Exhibit 33: Plant location and capacity

Plant Location Capacity (mn units)
Bawal, Haryana Motor-cycle 6.1
Chinchwad, Maharashtra Auto/ Motor-cycle 1.8/3.3
Haldia, West Bengal Auto/Industrial 1.0/0.3
Hosur, Tamil Nadu Auto/Industrial 1.6/0.8
Shamnagar, West Bengal Auto/Industrial 1.0/0.3
Taloja, Maharashtra Auto 1.7
Exhibit 34: Subsidiary information

Subsidiary companies Objective % stake Sales (Rs. cr) PBT (Rs. cr)
Espex Batteries, UK Selling and marketing of lead acid batteries 51 30.2 0.36
Design and manufacturing of battery chargers and
Caldyne Automatics, Kolkata 100 37 37
DC/AC distribution boards
Chloride Batteries SE Asia Pte, Singapore Production and sales of lead acid batteries 100 122.67 4.73
Chloride International Operations in non-conventional energy systems 100 12 0.37
Chloride Metals, Pune Lead smelting and refining activities 100 264 15
Leadage Alloys, Karnataka Lead smelting and refining activities 100 546 54
Associated Battery Manufacturers, Sri Lanka Manufacturing and marketing of lead acid batteries 61.5 63.96 6.2
Source: Company, Angel Research; Note: Financial information for FY2010
September 2010 26
Profit & Loss Statement

Y/E March (Rs cr) FY07 FY08 FY09 FY10 FY11E FY12E FY13E
Gross sales 2,383 3,606 4,233 4,542 5,769 6,846 8,062
Less: Excise Duty 300 449 464 328 461 548 645
Less: Sales Tax, VAT, Octroi 213 312 376 419 519 616 726
Net Sales 1,870 2,845 3,393 3,794 4,788 5,682 6,691
Total operating income 1,870 2,845 3,393 3,794 4,788 5,682 6,691
% chg 35.6 52.1 19.3 11.8 26.2 18.7 17.8
Total Expenditure 1,565 2,373 2,845 2,902 3,723 4,464 5,303
Net Raw Materials 1,141 1,874 2,248 2,181 2,882 3,396 4,061
Other Mfg costs 143 163 188 219 262 303 352
Personnel 120 146 165 219 252 340 401
Other 161 191 243 284 327 426 489
EBITDA 305 472 548 892 1,065 1,218 1,388
% chg 38.8 54.5 16.1 62.8 19.4 14.4 14.0
(% of Net Sales) 16.3 16.6 16.1 23.5 22.2 21.4 20.7
Depreciation & Amortisation 54 64 68 81 97 108 127
EBIT 251 408 480 811 967 1,110 1,261
% chg 52.0 62.2 17.8 69.0 19.2 14.8 13.6
(% of Net Sales) 13.4 14.3 14.1 21.4 20.2 19.5 18.8
Interest & other Charges 31 41 52 14 7 7 7
Other Income 15 7 7 12 14 16 19
(% of PBT) 6.3 2.0 1.6 1.5 1.5 1.5 1.5
Recurring PBT 235 374 435 810 974 1,120 1,273
% chg 55.1 59.2 16.3 86.2 20.2 14.9 13.7
Extraordinary Expense/(Inc.) 3 2 1 - - - -
PBT (reported) 232 372 434 811 974 1,120 1,273
Tax 80 124 151 273 316 363 413
(% of PBT) 34.4 33.3 34.7 33.7 32.4 32.4 32.5
PAT (reported) 152 248 283 537 659 757 860
ADJ. PAT 155 250 284 537 659 757 859
% chg 54.1 61.3 13.6 88.9 22.6 14.9 13.4
(% of Net Sales) 8.3 8.8 8.4 14.2 13.8 13.3 12.8
Basic EPS (Rs) 2.1 3.1 3.6 6.3 7.7 8.9 10.1
Fully Diluted EPS (Rs) 2.1 3.1 3.6 6.3 7.7 8.9 10.1
% chg 54.1 51.2 13.6 77.7 22.6 14.9 13.4
September 2010 27
Balance Sheet
SOURCES OF FUNDS
Equity Share Capital 75 80 80 85 85 85 85
Reserves& Surplus 595 946 1,170 2,135 2,694 3,327 4,037
Shareholder’s Funds 670 1,026 1,250 2,220 2,779 3,412 4,122
Total Loans 325 350 317 90 90 90 90
Deferred Tax Liability 45 48 41 59 54 49 43
Total Liabilities 1,040 1,424 1,609 2,369 2,923 3,550 4,255
APPLICATION OF FUNDS
Gross Block 946 1,097 1,257 1,336 1,710 1,959 2,230
Less: Acc. Depreciation 480 542 589 660 757 865 992
Net Block 466 555 668 677 953 1,094 1,238
Capital Work-in-Progress 31 47 17 38 17 20 22
Investments 378 518 668 1,335 1,637 1,952 2,383
Current Assets 575 876 742 912 1,060 1,366 1,647
Cash 1 2 34 3 1 54 97
Loans & Advances 29 45 38 48 48 63 74
Other 545 830 669 861 1,011 1,249 1,477
Current liabilities 410 572 487 593 744 882 1,035
Net Current Assets 165 304 255 319 316 484 611
Total Assets 1,040 1,424 1,609 2,369 2,923 3,550 4,255
Cash Flow Statement

Profit before tax 232 372 434 811 974 1,120 1,273
Depreciation 54 64 68 81 97 108 127
Change in Working Capital 25 124 (55) 62 15 102 77
Less: Other income 42 243 (202) 159 11 234 185
Direct taxes paid 80 124 151 273 316 363 413
Cash Flow from Operations 189 194 498 521 760 732 879
(Inc.)/Dec. in Fixed Assets (88) (167) (130) (100) (353) (252) (274)
(Inc.)/Dec. in Investments (99) (140) (150) (667) (301) (316) (430)
(Inc.)/Dec. in loans and advances (0) (13) 6 3 (14) (15) (11)
Other income (7) 14 (41) (11) - - -
Cash Flow from Investing (194) (307) (315) (775) (668) (582) (715)
Issue of Equity - 149 - 530 - - -
Inc./(Dec.) in loans 35 25 (33) (227) (0) - -
Dividend Paid (Incl. Tax) 26 31 37 56 95 99 124
Others (71) (91) (156) (135) (189) (196) (246)
Cash Flow from Financing (10) 113 (151) 224 (94) (97) (122)
Inc./(Dec.) in Cash (16) 0 32 (31) (2) 53 42
Opening Cash balances 17 1 2 34 3 1 54
Closing Cash balances 1 2 34 3 1 54 97
September 2010 28
Key Ratios
Valuation Ratio (x)
P/E (on FDEPS) 76.5 50.6 44.6 25.1 20.4 17.8 15.7
P/CEPS 56.7 40.3 36.0 21.8 17.8 15.6 13.6
P/BV 18.9 12.8 10.4 6.1 4.9 4.0 3.3
Dividend yield (%) 0.2 0.3 0.4 0.6 0.6 0.8 0.9
EV/Sales 7.2 4.7 3.9 3.2 2.5 2.0 1.7
EV/EBITDA 43.9 28.2 23.9 13.7 11.2 9.5 8.0
EV / Total Assets 12.9 9.3 8.1 5.2 4.1 3.3 2.6
Per Share Data (Rs)
EPS (Basic) 2.1 3.1 3.6 6.3 7.7 8.9 10.1
EPS (fully diluted) 2.1 3.1 3.6 6.3 7.7 8.9 10.1
Cash EPS 2.8 3.9 4.4 7.3 8.9 10.2 11.6
DPS 0.4 0.4 0.6 1.0 1.0 1.3 1.5
Book Value 8.4 12.4 15.2 25.8 32.3 39.8 48.1
DuPont Analysis
EBIT margin 13.4 14.3 14.1 21.4 20.2 19.5 18.8
Tax retention ratio 0.7 0.7 0.7 0.7 0.7 0.7 0.7
Asset turnover (x) 3.2 3.8 3.9 4.0 4.2 4.1 4.1
ROIC (Post-tax) 28.3 36.6 36.0 57.4 58.0 54.2 52.3
Cost of Debt (Post Tax) 6.6 8.1 10.1 4.4 5.4 5.4 5.4
Leverage (x) - - - - - - -
Operating ROE 28.3 36.6 36.0 57.4 58.0 54.2 52.3
Returns (%)
ROCE (Pre-tax) 26.0 33.1 31.7 40.8 36.6 34.3 32.3
Angel ROIC (Pre-tax) 40.7 47.0 54.9 81.1 77.1 73.4 72.3
ROE 25.4 29.5 25.0 31.0 26.4 24.5 22.8
Turnover ratios (x)
Asset Turnover (Gross Block) 2.0 2.8 2.9 2.9 3.1 3.1 3.2
Inventory / Sales (days) 62 62 54 50 49 49 50
Receivables (days) 29 26 26 23 26 26 26
Payables (days) 53 51 46 42 40 39 40
Working capital cycle (ex-cash) (days) 30 30 28 26 24 24 26
Solvency ratios (x)
Net debt to equity (0.1) (0.2) (0.3) (0.6) (0.6) (0.6) (0.6)
Net debt to EBITDA (0.2) (0.4) (0.7) (1.4) (1.5) (1.6) (1.7)
Interest Coverage (EBIT / Interest) 8.1 10.0 9.3 60.1 134.6 154.5 175.5
Note: Market price as on September 20, 2010
September 2010 29
Auto Ancillary
September 2010
Amara Raja Batteries BUY

CMP Rs213
Catching up Target Price Rs261
Investment Period 12 Months
Amara Raja Batteries (ARBL) is India’s second largest player of lead batteries with
market share of ~26%. Although the company has always traded at a discount to
Exide (due to Exide’s leadership position, scale of operations, superior margins Stock Info
and return ratios), ARBL is well placed to tap the rising demand from the Sector Auto Ancillary
automobile and industrial segments with its innovative products, increased Market Cap (Rs cr) 1,818
capacity and widening reach. ARBL is trading at 11.9x FY2011E and 9.2x Beta 0.87
FY2012E earnings. We feel the stock is available at attractive valuations. We 52 Week High / Low 225/131
Initiate Coverage on ARBL with a BUY rating and a Target Price of Rs261 Avg. Daily Volume 79,508
(23% potential upside). At our target price, the stock will trade at 11.3x (35% Face Value (Rs) 2
discount to Exide's multiple of 17.3x) FY2012E EPS of Rs23.1.
BSE Sensex 19,906
Auto batteries to ride on OEM and replacement battery demand: We expect the Nifty 5,980
auto battery market to post a 20% revenue CAGR over FY2010–13E, led by a Reuters Code AMAR.BO
robust ~12% CAGR in new vehicle sales volume across segments and growing Bloomberg Code AMRJ@IN
vehicle population. Thus, we expect ARBL to post a 30.8% revenue CAGR for the
auto batteries segment, aided by robust volume growth. ARBL is also focusing on
strengthening its distribution network, which will increase its market share to Shareholding Pattern (%)
~30% by FY2013E from the current 24–27%. Promoters 52.1
MF / Banks / Indian Fls 20.8
Capacity expansion to provide scale: Supported by strong demand for auto
FII / NRIs / OCBs 8.7
batteries, ARBL plans to increase its two-wheeler and four-wheeler battery capacity
Indian Public / Others 18.4
by 100% and 21%, respectively, by FY2011, incurring a capex of Rs85cr (Rs150cr
overall capex). We expect ARBL to post a 23% CAGR in revenue, driven by a
strong 17.9% volume CAGR over FY2010–13E.
Abs. (%) 3m 1yr 3yr
JV with JCI – Well placed to chase long-term growth opportunities: Growing Sensex 13.3 18.9 21.8
concerns about the environmental impact of CO2 emissions and significant ARBL 21.5 54.1 121.2
investments by global auto majors to develop alternative fuel base vehicles offer a
huge opportunity to industry players. We believe ARBL, through its existing
relationship with Johnson Controls (JCI), is well placed to tap the demand for new
generation automotive batteries (lithium ion and hybrid) in the long run.
Key Financials
Y/E March (Rs cr) FY2009 FY2010 FY2011E FY2012E
Net Sales 1,313 1,465 1,871 2,267
% chg 21.2 11.6 27.7 21.2
Net Profit 80.5 167.0 152.4 197.1
% chg (14.7) 107.5 (8.8) 29.3
EBITDA (%) 11.5 19.2 14.6 14.4
EPS (Rs) 9.4 19.6 17.8 23.1
P/E (x) 22.6 10.9 11.9 9.2 Vaishali Jajoo
P/BV (x) 4.5 3.3 2.7 2.1 022-4040 3800 Ext: 344
vaishali.jajoo@angeltrade.com
RoE (%) 21.8 35.2 24.8 25.5
RoCE (%) 16.8 34.9 28.5 28.6
Yaresh Kothari
EV/Sales (x) 1.5 1.2 1.0 0.8
022-4040 3800 Ext: 313
EV/EBITDA (x) 13.2 6.5 6.8 5.6 yareshb.kothari@angeltrade.com
Source: Company, Angel Research; Note: Market price as of September 20, 2010

Amara Raja Batteries | Auto Ancillary
Investment rationale
Auto batteries to ride on OEM and replacement battery demand
ARBL derives ~50% of its revenue from the automotive battery segment. ARBL and
Exide cater to almost the entire organised automotive battery market, with Exide
being the market leader having a market share of 60-65%, followed by ARBL with
a share of 24–27%. We expect the automotive battery market to post a 20% CAGR
in sales over FY2010–13E. Consequently, we expect ARBL to post a 17.9% volume
CAGR. ARBL’s low base of volume offers more leeway to increase its market share
in the OEM and replacement segments compared to Exide.
Exhibit 1: Volume to grow at a 17.9% CAGR Exhibit 2: Auto battery revenue to drive total revenue
('000 units) Auto battery volume yoy growth (RHS) (%) (Rs cr) Auto battery revenue yoy growth (RHS) (%)
9,000 8,326 30 2,000 1,893 50
8,000 7,482 1,800 45
25 1,531
7,000 6,417 1,600 40
1,400 1,237 35
6,000 5,094 20
1,200 30
5,000 4,230
15 1,000 790 846 25
4,000
800 20
3,000 10
600 15
2,000 400 10
5
1,000 200 5
0 0 0 0
FY09 FY10 FY11E FY12E FY13E FY09 FY10 FY11E FY12E FY13E
OE segment to aid demand for automobile batteries
ARBL has 24–27% market share in the The automobile industry, which is a barometer for the country’s economic strength,
OEM segment posted a 9.1% volume CAGR over FY2006–10, led by buoyant economic activity.
The industry has also benefitted from the introduction of new models, easy
availability of finance and aggressive pricing by players. Favourable
demographics, low penetration level and higher per capita income would support
the long-term increase in auto volumes in India. We expect the four-wheeler and
two-wheeler segments to report volume CAGRs of ~13% and ~11%, respectively,
over FY2010–13E, resulting in the auto industry witnessing a ~12% volume CAGR.
The expected surge in auto volumes would create a sustainable demand for
automotive batteries going ahead, thus benefitting ARBL.
ARBL derives ~14% of its revenue from OEMs and enjoys a 24–27% market share
in the automotive OEM market. The company supplies automotive batteries to
major OEMs in the country, including Ashok Leyland, Hyundai, M&M, Maruti, Tata
Motors, General Motors, TAFE and FIAT. ARBL is also an exclusive supplier to
Daimler Chrysler, Ford and the Maruti-Swift platform.
September 2010 31
Replacement demand to drive growth
ARBL derives ~33% of its revenue from The short lifespan of automotive batteries, which is 3–4 years for four-wheelers
the replacement segment and two-wheelers, creates an attractive replacement market. The replacement
market largely tracks the number of vehicles on the road. We estimate vehicle
penetration in India to grow at a CAGR of ~9% over FY2010–13E. On the back of
healthy growth in OE sales in the last few years, we expect replacement battery
demand to witness a 13–15% CAGR over FY2010–13E. This will benefit ARBL, as
the company derives ~65% of its automotive battery segment’s revenue from the
replacement market.
Over the past three years, ARBL has been focusing on branding. The company has
steadily expanded its retail distribution network, as a strong distribution network is
essential to serve the replacement market effectively. ARBL has successfully
established itself in a market that is dominated by Exide. The company has a
network of over 18,000 retailers, 200 franchisees and 700 PowerZone outlets,
catering to the semi-urban and rural markets. ARBL’s market share in the
replacement market now stands at ~26%. The company plans to widen its retail
network to further increase its penetration in the replacement market.
Exhibit 3: Distribution network Exhibit 4: OEM and replacement market share

FY07 FY08 FY09 FY10 (%) OEM Organised replacement
30 28
27
26 26 26
25 25
AQUA - 50 70 75 25
20
20
Franchises 152 175 189 200
15
Amaron PitStops 115 120 145 145 10
5
Retailers 14,000 18,000 18,000+ 18,000+
0
PowerZone - 400 600 700 FY07 FY08 FY09 FY10
September 2010 32
Industrial batteries
UPS/inverter segment to drive demand
Telecom battery segment contributes Demand for industrial batteries has been fairly strong over the past couple of
28–30% of overall revenue years, largely due to the significant boom in the telecom sector. As a result, ARBL’s
industrial battery business grew at a ~34% CAGR over FY2006–10. ARBL enjoys
strong ties with its customers and has emerged as a preferred supplier to leading
telecom operators. ARBL commanded a market share of 30–32% in the telecom
battery segment in FY2010. However, the telecom sector, which constitutes
28–30% of ARBL’s sales, is expected to post modest growth going forward due to
the slowdown in the telecom space. We estimate the company’s telecom battery
segment to register a single-digit CAGR (~5%) in volumes over FY2010–13E.
Exhibit 5: Ind. battery segment – Stable market share Exhibit 6: UPS/inverter batteries to contribute more
(%) (%) Telecom revenue UPS/Inverter revenue
30 70
28 60.0
27 27 27 60 53.7 55.7
27 51.1
48.9
50 46.3 44.3
40.0
24 40
30
21
20
18
10
15 0
FY07 FY08 FY09 FY10 FY10 FY11E FY12E FY13E
ARBL plans to enter the tubular battery Going forward, we expect demand for industrial batteries to be driven by the
segment in the next couple of years power back-up (UPS) and railways segments. Large-scale computerisation of
banking networks, government departments and power deficit (~10.1% in
FY2010) have led to increased demand for batteries in the UPS/inverter segment
over the last five years, reporting a ~15% CAGR. ARBL has emerged as one of the
key suppliers to OEMs of digital UPS devices and inverters, and the company
currently controls a large part of the replacement market. As of FY2010, ARBL’s
market share in the UPS segment stood at ~28%. We believe the power demand-
supply gap will continue over the medium term with deficit likely to be ~7.0% in
FY2013E, expected to drive demand for UPS/inverter batteries.
Further, the company plans to enter the tubular batteries segment in the next
couple of years. Tubular batteries are mainly used in material handling equipment.
September 2010 33
Capacity expansion to provide scale
Two-wheeler and four-wheeler battery ARBL currently has capacity of 4.2mn four-wheeler, 1.8mn motorcycle and
capacity to increase by 100% and medium VRLA and 900mnAH large VRLA batteries. With its strong focus on
~21%, respectively two-wheeler batteries, ARBL plans to double the capacity of motorcycle batteries to
3.6mn units by December 2010. The company also plans to increase the capacity
of four-wheeler batteries by ~21% to 5.1mn units by January 2011. The recent
capacity expansion in the automotive batteries segment comes on the back of
~100% expansion in large VRLA batteries to 900mnAH in FY2009 and a ~50%
increase in medium VRLA batteries to 1.8mn units in FY2010.
ARBL plans to spend ~Rs150cr in FY2011 on battery capacity expansion. With

demand expected to remain robust for automobile batteries, ARBL plans to
increase the capacity of its automotive batteries division. Capacity expansions
would be funded through a mix of debt and internal accruals.
Exhibit 7: Capacity utilisation to remain at high levels

(mn units) Installed capacity Utilisation
(%)
12 100
90
10
80
70
8
60
6 50
40
4
30
20
2
10
0 0
The company is operating at over 75–80% utilisation level in the auto battery
segment and 70–75% in the industrial battery segment. With additional capacity
going on stream by end-FY2011 and higher utilisation levels, we estimate ARBL to
post a 23% revenue CAGR over FY2010–13E aided by a robust volume growth.
September 2010 34
JV with JCI–Well placed to chase long-term growth opportunities
ARBL is a joint venture between the Galla family and JCI, with each holding a 26%
stake in the venture. ARBL has a technological tie-up with JCI.
JCI is the world’s largest manufacturer of automotive batteries with revenue of

around US $28.5bn in CY2009. JCI capitalised on its global scale, technology and
talent to generate cost improvements across businesses. JCI continues to expand in
emerging growth markets, especially China, India, Brazil and the Middle East, as
growth and economic recovery in these markets have been faster compared to
mature markets. Factors such as high temperature, financial growth and energy
constraints in most of these companies will drive demand for JCI’s offerings.
Exhibit 8: JCI – Financials

(in US $bn) CY2007 CY2008 CY2009 CY2010E Remarks
Sales Revenue 34.6 38.1 28.5 33.5
For CY2010, JCI expects to continue to perform well on the
% change 7.4 9.9 (25.1) 17.6 whole. Sales are expected to increase by ~17% in CY2010,
Gross Profit 5.1 5.5 3.5 4.4 despite the strong euro. Growth would largely be aided by
around 4% yoy growth in AE, 13% yoy growth in PS and
Gross Profit Margin (%) 14.7 14.5 12.5 13.0 about 5% yoy growth in BE. Thus, bottom line is estimated to
Net Income (Loss) 1.3 1.0 (0.3) 0.3 be back in the green on profitable conversion of incremental
revenue, investment in growth initiatives and impact of
% change 21.8 (21.8) - - revised euro assumption.
Return on Sales 3.6 2.6 (1.2) 1.0

R&D Cost 0.8 0.8 0.8 0.9 R&D plays an active role in securing the future of the
company, which ultimately boosts JCI’s innovative strength
% to Sales Revenue 2.2 2.2 2.7 2.5
and offers growth opportunities.
Capital Expenditure 0.8 0.8 0.6 0.8
Exhibit 9: Segment-wise revenue contribution Exhibit 10: Geographical break-up of revenue

Automotive Experience (AE) Building Efficiency (BE) Power Solutions (PS) Rest of world Europe America
4%
14% PS 34%
62%
42% 17%
BE 30%
53%
44% 9%
AE 52%
39%
0% 10% 20% 30% 40% 50% 60% 70%
Growing concerns regarding the environmental impact of carbon dioxide

emissions from automobiles, high crude oil prices and depleting fossil fuel
resources resulted in significant investments by global auto majors to develop
alternative fuel base vehicles. JCI is the global leader in lead-acid automotive
batteries and advanced batteries for hybrid and electric vehicles. JCI has been
offering various solutions for new generation automotive batteries such as
lithium-ion and hybrid technology, which would help ARBL in the long run
(leverage on these technologies implemented in the developed market).
September 2010 35
Financial performance
Net sales to grow at a 23% CAGR over FY2010–13E
ARBL’s net sales grew at a 35.1% CAGR over FY2007–10, led by strong growth in
the automobile and industrial battery businesses. Growth in sales can be attributed
to the rise in volumes, which reported a 28.1% CAGR over FY2007–10.
We expect ARBL’s revenue to register a 23% CAGR over FY2010–13E, led by

increased volumes in the automobile battery business and demand for UPS
batteries in the industrial battery business. As such, we expect automobile battery
and industrial battery businesses to witness CAGRs of 30.8% and 15.9%,
respectively.
Exhibit 11: Sales momentum to continue Exhibit 12: Revenue break-up

(Rs cr) Net sales yoy growth (RHS) (%) (%) Auto battery segment Ind battery segment
3,000 2,727 90 70
56.8 58.1 59.0
80 60
2,500 2,267 50.0 50.0
70
1,871 50 43.2
2,000 60 41.9 41.0
1,465 50 40
1,500 1,313
1,083 40 30
1,000 30
594 20
20
500 10
10
0 0 0
FY07 FY08 FY09 FY10 FY11E FY12E FY13E FY10 FY11E FY12E FY13E
Going forward, we believe the proportion of automobile revenue to total revenue

will increase to ~59% from the current level of ~50% by FY2013E.
Exhibit 13: Key assumptions

Y/E March FY2010P FY2011E FY2012E FY2013E
Volumes (‘000 units)
Automotive Battery
Four Wheeler 3,318 3,825 4,386 4,881
Motorcycle/Small VRLA 1,776 2,592 3,096 3,445
Industrial Battery
Large VRLA (mn Ah) 622 630 675 720
Medium VRLA 1,221 1,548 1,848 2,195
% utilization
Automotive 81 84 86 91
Industrial 72 79 81 87
Revenue (Rs cr)
Automotive Battery 846 1,237 1,531 1,893
Industrial Battery 846 939 1,105 1,316
Large VRLA 507 504 540 583
Medium VRLA 338 435 565 732
Gross Revenue 1,691 2,176 2,636 3,208
September 2010 36
EBITDA to grow at CAGR of 11% over FY2010-13E

ARBL’s margins improved considerably by 774bp to 19.2% in FY2010 from 11.5%
in FY2009 due to inventory gains, led by softening lead prices, appreciating Indian
rupee, cost rationalisation and optimisation measures. Lead prices have risen
considerably from their lows and are currently trading at US $2,100–2,200/tonne.
Lead prices, which have been volatile in the past, pose a threat to our margin
estimates. We have modeled 10% annual increase in average lead price over next
two years. Since the company passes on increases in lead prices to its industrial
and automotive customers (with lag effect), we expect the company to operate at
14-15% operating margin going forward. Thus, we model EBITDA to witness a
11% CAGR over FY2010–13E.
Exhibit 14: High inventory levels to stabilise lead prices Exhibit 15: ...leading to steady EBITDA margins
(USD/tonne) Lead inventory (RHS) Lead prices (LHS) (tonne) (US $/tonne) Lead prices EBITDA margins (%)
3,000 30
5,000 250,000
2,500 25
4,000 200,000
2,000 20
3,000 150,000
1,500 15
2,000 100,000 1,000 10
1,000 50,000 500 5
0 0
0 0
FY11E
FY12E
FY13E
1QFY09
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
Aug-01
Aug-02
Aug-03
Aug-04
Aug-05
Aug-06
Aug-07
Aug-08
Aug-09
Aug-10
Since ARBL imports ~60% of its lead requirement, the company’s margin is
expected to be lower compared to Exide, which procures ~50% of its lead
requirements from captive smelters, which gives Exide a significant cost advantage.
Return ratios to remain high
We expect ARBL’s net profit to increase in line with its EBITDA, at a 10.7% CAGR,
over FY2010–13E. We estimate EPS to increase to Rs26.5 in FY2013E from Rs19.6
in FY2010. On the back of improved fundamentals we estimate ARBL to register
RoE of 23–25% and RoCE of 28–29% over the next two years.
Exhibit 16: Net profit to register a CAGR of 10.7% Exhibit 17: Return rations to better historical levels
(Rs cr) Net profit yoy growth (RHS) (%) (%) RoE RoCE
250 227 120 40 35.2
32.7
197 100 35
200 34.9 28.5 28.6 28.5
167 80 30
152
60 25 21.8
150 20.3 26.0
24.8 25.5 23.4
40 20
94 21.1
100 80 20 15 16.8 Higher ratios on account
47 0 10 of exceptional margins
50 due to inventory gains
(20) 5
0 (40) 0
September 2010 37
Key concerns
Slowdown in demand for automobile and industrial batteries
Sales to OEMs constitute ~14% of ARBL’s revenue and are highly dependent on
offtake in cars, commercial vehicles and two-wheelers. Any decline in demand due
to a slowdown in economic activity or rise in interest rates will have an adverse
impact on automobile demand, which poses downside risk to our estimates.
Further, the slowdown in economic activity will have a negative impact on the
demand for industrial batteries as well. Demand for industrial batteries is expected
to remain subdued in FY2011, mainly due to the slowdown in the telecom
segment. The telecom segment, which contributes 30-35% of industrial battery
sales, declined in FY2010. Going ahead, if the decline in demand of industrial
battery segment is severe, there exists a downside risk to our revenue and earnings
estimates.
Fluctuation in lead prices

Lead and lead alloys are the key inputs and major cost elements in the battery
manufacturing process. Lead accounts for ~80% of ARBL’s raw-material cost. ARBL
takes into account changes in lead prices on a monthly basis for auto replacement
and industrial customers and on a quarterly basis for automotive OE customers.
During FY2010, ARBL reaped the benefits of low lead prices and strong growth in
the battery business, posting a 774bp margin improvement. Substantial volatility in
lead prices is likely to affect the company's profitability if it is unable to pass on the
price increase. The sensitivity analysis shows the impact of the rise in lead prices
and rupee–dollar movement on ARBL’s EBITDA margin.
Exhibit 18: Sensitivity analysis – Lead price impact on FY2012E EBITDA

LME Lead prices (US $/kg)

1.9 2.2 2.4 2.6 2.9
41.5 23.3 19.9 16.8 14.6 12.9
Rupee-Dollar rate
43.7 21.6 18.3 15.5 13.6 12.4

46.0 20.0 16.9 14.4 12.9 12.1
48.3 18.5 15.7 13.5 12.3 12.0
50.7 17.1 14.6 12.8 12.1 12.2
Source: Bloomberg, Company, Angel Research
We expect average lead prices to increase ~10% annually until FY2012E.

However, any significant increase in prices beyond these levels will impact the our
margin estimates.
Competitive pricing scenario
We believe a slowdown in battery demand may lead to a pricing action by Exide as

it enjoys a cost advantage compared to its peers due to captive lead sourcing. In
such a scenario, there exists a downside risk to our revenue and earnings estimates
for ARBL.
September 2010 38
Outlook and valuation
Although ARBL has always traded at a discount to Exide (due to Exide’s leadership
position, scale of operations, superior margins and return ratios), ARBL is well
placed to tap the rising demand from the automobile and industrial segments with
its innovative products, increased capacity and widening reach.
On the valuation front, ARBL is trading at 11.9x and 9.2x FY2011E and FY2012E
EPS, respectively. At present, ARBL is trading at ~35% discount to Exide (adjusted
for Insurance business). The gap is due to Exide’s leadership position, higher
margins and low dependence on the telecom battery segment. The discount
commanded by ARBL compared to Exide would reduce with a) increasing scale of
operations, b) sustainable revenue and earnings visibility and c) improving return
ratios.
We Initiate Coverage on ARBL with a BUY rating and a 12-month Target Price of
Rs261, representing a ~23% potential upside. At our target price, the stock will
trade at 11.3x (35% discount to Exide's multiple of 17.3x) FY2012E EPS of Rs23.1.
Exhibit 19: ARBL – P/E Premium/Discount to Exide Exhibit 20: ARBL–EV/EBITDA Premium/Discount to Exide
(%) prem./ disc. to Exide Three-yr average Prem/Disc (%) Prem./ Disc. to Exide Three-yr average Prem/Disc
0 Five-yr average Prem/Disc 0 Five-yr average Prem/Disc
(10) (10)
(20) (20)
(30) (30)
(40) (40)
(50)
(50)
(60)
(60)
(70)
(80) (70)
(90) (80)
May-08
Jul-09
Mar-07
Feb-10
Apr-04
Nov-04
Oct-07
Dec-08
Aug-06
Sep-10
Jun-05
Jan-06
May-08
Jul-09
Mar-07
Feb-10
Apr-04
Nov-04
Oct-07
Dec-08
Aug-06
Sep-10
Jun-05
Jan-06
Exhibit 21: One-year forward P/E band Exhibit 22: One-year forward P/E chart
(Rs) Share price (Rs) 5x 8x 11x 14x (x) One-yr forward P/E Three-yr average P/E
300 Long term average P/E
30
225 25
20
150 15
10
75
5
0 0
Dec-01
Dec-03
Dec-05
Dec-07
Dec-09
Apr-01
Apr-03
Apr-05
Apr-07
Apr-09
Aug-02
Aug-04
Aug-06
Aug-08
Aug-10
Dec-01
Dec-03
Dec-05
Dec-07
Dec-09
Apr-01
Apr-03
Apr-05
Apr-07
Apr-09
Aug-02
Aug-04
Aug-06
Aug-08
Aug-10
September 2010 39
Exhibit 23: One-year forward EV/EBITDA band Exhibit 24: One-year forward EV/EBITDA chart
(Rs cr) EV (Rs cr) 2x 5x 8x 11x (x) One-yr forward EV/EBITDA Three-yr average EV/EBITDA
3,500 Long term average EV/EBITDA
10
3,000
8
2,500
2,000 6
1,500
4
1,000
2
500
0 0
Dec-01
Dec-03
Dec-05
Dec-07
Dec-09
Dec-01
Dec-03
Dec-05
Dec-07
Dec-09
Apr-01
Aug-02
Apr-03
Aug-04
Apr-05
Aug-06
Apr-07
Aug-08
Apr-09
Aug-10
Apr-01
Apr-03
Apr-05
Apr-07
Apr-09
Aug-10
Aug-02
Aug-04
Aug-06
Aug-08
September 2010 40
DCF-based valuation
Taking into account the prospects of ARBL’s future free cash flow generation
capability, we have used a DCF methodology to arrive at an intrinsic/fair value for
ARBL. Assuming a WACC of 14.4% and a terminal growth rate of 3%, our fair
value works out to Rs264, at which ARBL would trade at a P/E multiple of 11.4x
and an EV/EBITDA multiple of 6.9x FY2012E earnings. We believe the DCF model
is conservative and captures most of the concerns related to the uncertainty in lead
prices.
Exhibit 25: DCF model

(Rs cr) FY2010A FY2011E FY2012E FY2013E FY2014E FY2015E FY2017E FY2019E FY2022E
EBIT 238 217 266 310 367 435 572 724 981
Depreciation 43 56 61 75 89 102 134 168 226
Change in Work Cap 17 (130) (101) (102) (124) (123) (92) (108) (63)
Capex 47 164 116 161 193 195 200 225 250
Free Cash Flows 169 (93) 27 22 20 77 226 320 571
Years Discounted - 1.0 2.0 3.0 4.0 5.0 7.0 9.0 12.0
Discount Factor 1.00 0.87 0.76 0.67 0.58 0.51 0.39 0.30 0.20
DCF (2 year forward) 27 20 15 51 115 124 148
Terminal growth rate 3.0%
WACC (@100% Equity and beta* of 0.8) 14.4%
Terminal Value 5,143
PV of terminal value 1,335
NPV of cash flows 929
Total value of firm 2,264
Net Debt 11
Equity Value of Firm 2,252
No of Shares (cr) 8.5
Fair Value/Share (in Rs) 264
CMP 213
Upside 23.9%
Source: Company, Angel Research; Note:* Beta based on three year price movement, Market price as of September 20, 2010
Exhibit 26: Sensitivity analysis

Terminal Growth Rate (%)
2.3 2.5 2.8 3.0 3.3 3.5 3.8
13.2 295 300 305 310 315 321 327
13.6 280 284 289 293 298 303 308
14.0 266 270 274 278 282 287 291
WACC (%)
14.4 253 256 260 264 268 272 276

14.8 241 244 247 251 254 258 262
15.2 230 233 236 239 242 245 249
15.6 219 222 225 227 230 233 236
September 2010 41
Company background
ARBL is India’s second largest manufacturer of VRLA batteries for both industrial
and automotive applications. The company is a JV between the Galla family and
JCI, with each holding a 26% stake in the venture. Based in Andhra Pradesh, ARBL
has a fully integrated manufacturing unit for its batteries at Tirupati. Automotive
and industrial batteries contribute 50% each to the company’s total revenue.
Exhibit 27: Auto battery segment’s revenue break-up Exhibit 28: Ind. battery segment’s revenue break-up
Export Others
7% OEM 15%
28%
UPS/Inverter
25% Telecom
Replacement 60%
65%
ARBL’s battery product portfolio comprises batteries with capacities ranging from
4.5Ah to 5,000Ah. The company has developed a niche for itself in the telecom
battery space and is the preferred battery supplier to major cellular service
providers, with a market share of ~32%. In the automotive battery space, ARBL
has a market share of ~27% in the OEM and ~26% in the replacement segment.
Exhibit 29: Major brands

Automotive batteries PRO, FLO, GO, BLACK, HI-WAY, FRESH, PRO BIKE RIDER
Industries batteries Power Stack, Quanta, Shield
Exhibit 30: Key management team

Name Designation
Ramachandra Galla Promoter & Non-Executive Chairman
Jayadev Galla Promoter & Managing Director
P Lakshmana Rao Non-Executive Director (Independent)
Nagarjun Valluripalli Non-Executive Director (Independent)
N Sri Vishnu Raju Non-Executive Director (Independent)
T R Narayanaswamy Non-Executive Director (Independent)
K Suresh Chief Finance Controller
N Ramnathan Company Secretary
ARBL has contracts with most of the four-wheeler makers in India, including Maruti,
Hyundai, Ashok Leyland, Tata Motors, M&M and TAFE. The company has a tie-up
with Maruti and has launched a co-branded replacement battery under the
Amaron MGB brand, which will be available across Maruti’s network of over 3,000
authorised outlets. ARBL also has a tie-up with Tata International for exporting
automobile batteries to select African countries.
September 2010 42
Strategic initiatives: Automotive battery segment

ARBL was the first company to launch ‘Maintenance Free’ batteries for the automotive segment and since then it has come
a long way in capturing a sizeable market share in the automotive market.
To build upon sales momentum, ARBL introduced VRLA technology for two-wheelers under the Amaron Pro Bike Rider
brand name with a 60-month warranty. The initiative has been taken off well in the market. ARBL has also entered into a
development agreement with Honda, Japan, for motor cycle VRLA batteries. The company has also launched a second
variant of motorcycle battery Amaron Pro Bike Rider Beta based on VRLA technology with a 48-month warranty.
ARBL has introduced low-price products at its outlets to boost volumes and improve its market share in the high-margin
replacement market. These low-price products have been accepted well by customers.
ARBL has also entered into an alliance with Maruti Suzuki to strengthen its aftermarket presence. ARBL’s Amaron brand will
be branded as Maruti Genuine Battery and will be marketed through Maruti’s authorised service networks across India.
On the distribution front, ARBL has strengthened its Amaron distribution network to 200 franchises and 18,000 retailers.
This has enabled the company to gain increased presence in rural and urban India.
ARBL conceptualised PowerZone retail outlets in rural and semi-urban areas to provide customised batteries for rural
applications. The outlets also offer complete power solutions for automobile and domestic applications, making it a one-
stop shop for all power needs.
Strategic initiatives: Industrial battery segment

ARBL was the first to introduce VRLA batteries for industry standby applications. The company introduced PowerStack and
Quanta brands of batteries to cater to the telecom and UPS segments. PowerStack (Large VRLA) and Quanta (Medium
VRLA) remain the preferred battery brands in the telecom and UPS segments. ARBL has steadily increased its market share
in the telecom and UPS segments to 32% and 28%, respectively.
In FY2010, ARBL developed PowerSleek (front terminal access) batteries to strengthen its position in the telecom and UPS
segments. The company is also designing solar power batteries for its UPS segment.
ARBL widened its reach through 75 strong Authorised Quanta Alliance (AQuA) partners with a pan India distribution
network to service replacement demand in industrial batteries.
In FY2010, ARBL enhanced its capacity to 1.8mn units per year from 1.2mn units per year.
ARBL developed small VRLA batteries for commercial and household applications.
Going forward, ARBL plans to enter the tubular battery segment. Tubular batteries are mainly used in material handling
equipment.
September 2010 43
Profit and Loss Statement

Gross sales 745 1,350 1,579 1,691 2,176 2,636 3,208
Less: Excise duty 151 267 266 226 305 369 481
Net Sales 594 1,083 1,313 1,465 1,871 2,267 2,727
Total operating income 594 1,083 1,313 1,465 1,871 2,267 2,727
% chg 63.6 82.3 21.2 11.6 27.7 21.2 20.3
Total Expenditure 511 921 1,163 1,184 1,599 1,940 2,342
Net Raw Materials 376 722 888 889 1,262 1,556 1,913
Other Mfg costs 27 41 48 58 67 72 81
Personnel 27 41 52 62 70 81 89
Other 82 117 175 174 199 231 259
EBITDA 83 163 150 281 273 327 385
% chg 74.7 95.5 (7.4) 87.0 (3.1) 19.9 17.6
(% of Net Sales) 14.0 15.0 11.5 19.2 14.6 14.4 14.1
Depreciation & Amortisation 17 24 35 43 56 61 75
EBIT 66 138 116 238 217 266 310
% chg 101.1 108.8 (16.1) 105.7 (9.2) 22.8 16.5
(% of Net Sales) 11.1 12.7 8.8 16.3 11.6 11.7 11.4
Interest & other charges 5 14 20 8 14 9 7
Other Income 10 22 27 24 25 29 32
(% of PBT) 14 15 22 9 11 10 10
Recurring PBT 71 146 123 255 228 286 334
% chg 90.8 105.0 (16.0) 107.6 (10.5) 25.6 16.9
Extraordinary Expense/(Inc.) - - - - - - -
PBT (reported) 71 146 123 255 228 286 334
Tax 24 52 42 88 75 89 108
(% of PBT) 33.9 35.3 34.4 34.4 33.1 31.1 32.2
PAT (reported) 47 94 81 167 152 197 227
ADJ. PAT 47 94 80 167 152 197 227
% chg 97.3 100.6 (14.7) 107.6 (8.8) 29.3 15.0
(% of Net Sales) 7.9 8.7 6.1 11.4 8.1 8.7 8.3
Basic EPS (Rs) 8.3 16.6 9.4 19.6 17.8 23.1 26.5
Fully Diluted EPS (Rs) 8.3 16.6 9.4 19.6 17.8 23.1 26.5
% chg 97.3 100.6 (43.1) 107.6 (8.8) 29.3 15.0
September 2010 44
Balance Sheet
SOURCES OF FUNDS
Equity Share Capital 11 11 17 17 17 17 17
Preference Capital - - - - - - -
Reserves& Surplus 232 322 389 527 666 848 1,057
Shareholder’s Funds 244 333 406 544 683 865 1,074
Minority Interest - - - - - - -
Total Loans 141 316 286 91 161 111 91
Deferred Tax Liability 14 17 18 22 22 16 13
Total Liabilities 398 666 710 656 866 992 1,179
APPLICATION OF FUNDS
Gross Block 258 311 427 491 645 756 909
Less: Acc. Depreciation 101 122 146 185 242 303 378
Net Block 157 189 281 306 404 453 531
Capital Work-in-Progress 6 66 40 23 32 38 45
Goodwill - - - - - - -
Investments 16 16 47 16 22 30 47
Current Assets 350 575 526 631 787 894 1,050
Cash 26 51 70 62 95 70 70
Loans & Advances 86 103 87 109 131 153 177
Other 238 421 369 460 561 671 803
Current liabilities 131 179 184 319 379 423 495
Net Current Assets 219 396 342 312 408 472 555
Mis. Exp. not written off - - - - - -
Total Assets 398 666 710 656 866 992 1,179
Cash Flow Statement

Profit before tax 71 146 123 255 228 286 334
Depreciation 17 24 35 43 56 61 75
Change in Working Capital 84 142 (65) (0) 30 79 77
Less: Other income 165 270 (177) 12 59 164 161
Direct taxes paid 24 52 42 88 75 89 108
Cash Flow from Operations (17) (9) 227 198 179 174 217
(Inc.)/Dec. in Fixed Assets (68) (112) (90) (47) (164) (116) (161)
(Inc.)/Dec. in Investments 16 (0) (31) 31 (6) (8) (17)
(Inc.)/Dec. in loans & adv. (20) (8) 9 16 (100) (22) (24)
Other income (3) (4) (13) (4) 0 0 0
Cash Flow from Investing (76) (125) (125) (4) (270) (146) (202)
Issue of Equity 0 0 6 0 0 0 0
Inc./(Dec.) in loans 100 176 (30) (195) 70 (50) (20)
Dividend Paid (Incl. Tax) 5 5 8 8 29 13 15
Others (7) (21) (67) (15) 24 (16) (10)
Cash Flow from Financing 98 159 (83) (202) 123 (53) (15)
Inc./(Dec.) in Cash 5 26 19 (8) 32 (25) (0)
Opening Cash balances 21 26 51 70 62 95 70
Closing Cash balances 26 51 70 62 95 70 70
September 2010 45
Key Ratios
Valuation Ratio (x)
P/E (on FDEPS) 25.8 12.8 22.6 10.9 11.9 9.2 8.0
P/CEPS 18.9 10.2 15.8 8.7 8.7 7.0 6.0
P/BV 5.0 3.6 4.5 3.3 2.7 2.1 1.7
Dividend yield (%) 0.3 0.6 0.4 1.4 0.6 0.7 0.8
EV/Sales 3.2 1.9 1.5 1.2 1.0 0.8 0.7
EV/EBITDA 23.1 12.7 13.2 6.5 6.8 5.6 4.7
EV / Total Assets 4.8 3.1 2.8 2.8 2.2 1.8 1.5
Per Share Data (Rs)
EPS (Basic) 8.3 16.6 9.4 19.6 17.8 23.1 26.5
EPS (fully diluted) 8.3 16.6 9.4 19.6 17.8 23.1 26.5
Cash EPS 11.2 20.9 13.5 24.6 24.4 30.2 35.3
DPS 0.7 1.2 0.8 2.9 1.3 1.5 1.8
Book Value 42.8 58.5 47.5 63.7 80.0 101.3 125.8
DuPont Analysis
EBIT margin 11.1 12.7 8.8 16.3 11.6 11.7 11.4
Tax retention ratio 0.7 0.6 0.7 0.7 0.7 0.7 0.7
Asset turnover (x) 2.1 2.3 2.2 2.5 2.8 2.8 2.8
ROIC (Post-tax) 15.7 18.7 12.8 26.7 21.8 22.3 21.5
Cost of Debt (Post Tax) 3.4 4.1 4.4 2.8 7.5 4.5 4.9
Leverage (x) - - - - - - -
Operating ROE 15.7 18.7 12.8 26.7 21.8 22.3 21.5
Returns (%)
ROCE (Pre-tax) 20.3 26.0 16.8 34.9 28.5 28.6 28.5
Angel ROIC (Pre-tax) 18.6 23.1 19.6 41.3 28.9 29.8 29.2
ROE 21.1 32.7 21.8 35.2 24.8 25.5 23.4
Turnover ratios (x)
Asset Turnover (Gross Block) 2.7 3.8 3.6 3.2 3.3 3.2 3.3
Inventory / Sales (days) 46 48 49 47 48 49 50
Receivables (days) 71 63 60 56 56 54 53
Payables (days) 43 30 30 35 38 38 37
Working capital cycle (ex-cash) (days) 88 91 86 65 55 58 59
Solvency ratios (x)
Net debt to equity 0.4 0.7 0.4 0.0 0.1 0.0 (0.0)
Net debt to EBITDA 1.2 1.5 1.1 0.0 0.2 0.0 (0.1)
Interest Coverage (EBIT / Interest) 14.0 9.6 5.8 30.1 15.4 29.9 42.5
Note: Market price as of September 20, 2010
September 2010 46
Annexure
September 2010 47
Auto Ancillary | Auto Sector Report
Battery industry – Overview

In the Rs9,700cr Indian storage batteries sector (as estimated in FY2010),
organised batteries market account for ~Rs7,300cr. Automotive batteries account
for nearly ~52% of the organised market by value at ~Rs3800, while industrial
batteries account for the balance ~48%. In the unorganised space, automotive
battery segment accounts for ~90% of the market and the players cater mainly to
the replacement demand.
Exhibit 1: Indian storage battery industry’s revenue Exhibit 2: Auto battery – Segment-wise offtake
Auto
90.9% Two Wheelers Commercial
Organised 21% Vehicles
indutrial 29%
36.4% Tractors
12%
Unorganised Cars and

24.8% Utility Vehicles
38%
Organised
auto
38.8%
Industrial
9.1%
Source: Company, Angel Research Source: Crisil Research, Company, Angel Research
Well-spread distribution network – Crucial to retain competitive edge
A wide distribution network and after-sales and service reach are key parameters
to gain competitive strength and increase market share in the industry. OEMs
prioritise operational efficiency, quality and after-sales and service reach. Hence,
most battery manufacturers distribute their products through exclusive
dealerships/service centres, retail distributors and OEM service centres.
In the replacement market too brand perception, after-sales service and product
differentiation play an important role. Thus, a well-entrenched distribution network
is a vital link in retaining customers as the costs involved in switching brands are
negligible. Leader Exide has the widest distribution in India with around 38,500
retail outlets for after-market sales in comparison to competitor ARBL, which has
18,000 retail outlets.
Automotive batteries to ride on auto sector’s secular growth

Automotive battery sales are driven by the production of automobiles and
replacement market. Around 30-35% of demand mix is derived from the OEM’s,
while the replacement segment contributes the balance 65-70%. In case of the
OEM’s, demand is derived from the different segments with cars and utility vehicles
accounting for the largest share of 38-40% followed by commercial vehicles (CV)
at 29-31%. Though the OEM segment is important as it assures big volumes,
brand visibility and quality, the profit margins are low in the range of 6-8%,
whereas in the replacement segment margins are at a healthy 15-18%.
September 2010 48
Exhibit 3: Vehicle sales and population in India Exhibit 4: OEM, Replacement battery volume trend
(mn units) Total Vehicle Population Total Vehicle Sales (mn units) OEM volume Replacement volume
160 150 70
137
140 126 60
116
120 107
100 50
100 90
81
80 73 40 41.4
67 37.2
55 59
60 49 30 32.1
41 45
27.3
40 23.9
18 20 20.6
14 15 17
20 7 8 9 11 11 11
4 5 5 5 6
10 17.5 19.0
0 13.4 15.8
10.1 11.1
FY06P
FY07P
FY08P
FY09P
FY10E
FY11E
FY12E
FY13E
FY99
FY00
FY01
FY02
FY03
FY04
FY05
0
FY08 FY09 FY10P FY11E FY12E FY13E
Source: SIAM, Angel Research Source: Industry, Companies, Angel Research
Automotive OEM segment revving up: The automobile sector registered a robust
10% volume CAGR during FY2005-10, which resulted in strong demand for
automotive batteries particularly from the OEM segment. Going ahead too, the
automobile volumes are expected to register an impressive ~12% CAGR over
FY2010-13E. Moreover, with the global automobile majors setting up
manufacturing plants in India, we expect the automotive battery sector to register
healthy growth over the medium term.
Exhibit 5: Four-wheeler sales Exhibit 6: Two-wheeler sales

('000 units) 4-wheeler sales 4-wheeler battery sales (mn units) ('000 units) 2-wheeler sales 2-wheeler battery sales (mn units)
5,000 25 15,000 40
4,000 20 12,000
30
3,000 15 9,000
20
2,000 10 6,000
10
1,000 5 3,000
0 0 0 0
FY08 FY09 FY10 FY11E FY12E FY13E FY08 FY09 FY10 FY11E FY12E FY13E
Source: SIAM, Industry, Companies, Angel Research Source: SIAM, Industry, Companies, Angel Research
The OEM market is dominated largely by brands such as Exide, Amaron and
AMCO. Exide is the market leader in the OEM segment with a market share of
60-65%, while ARBL enjoys market share of 24-27%.
September 2010 49
Exhibit 7: Four-wheeler OEM market share Exhibit 8: Two-wheeler OEM market share
(%) FY08 FY09 (%) FY08 FY09
70 66.7 64.7 56.3
60 53.9
60
50
42.3 40.8
50
40
40
30
30 26.3 26.5
20
20
7.0 8.8 10 5.3
10 1.4
0 0
Exide ARBL Others Exide Amco Others
Source: Industry, Companies, Angel Research Source: Industry, Companies, Angel Research
Replacement battery demand rising on increasing vehicle base: The replacement

segment constitutes the largest share of automotive batteries. On an average, a
battery comes up for replacement once in three to four years and there could be as
much as three replacements during the life-time of a vehicle. The buoyant growth
in the automobile segment over the past four years (~9.1% CAGR over
FY2006-10) has percolated into the replacement market. We estimate vehicle
population to grow at ~9% CAGR over FY10-13E (~9.5% over FY2006-10).
Moreover, increasing usage of electrical and electronic equipment (power
windows, central locking, etc) in automobiles is expected to boost the demand for
power from the batteries, which would in turn bolster the replacement demand.
Exhibit 9: Four-wheeler replacement market share Exhibit 10: Two-wheeler replacement market share
(%) FY08 FY09 (%) FY08 FY09
60 54.5 70
49.0 58.8
50 60 53.1
50
40
40
27.5
30 23.5 27.5
22.7 22.7 30 25.0
21.9
20
20 13.7
10 10
0 0
Exide ARBL Others Exide Amco Others
Source: Industry, Companies, Angel Research Source: Industry, Companies, Angel Research
The replacement segment is highly concentrated in the hands of few players in the
organised sector (Exide and ARBL), but a large portion continues to be dominated
by the unorganised players. The unorganised players cater to the lower end of the
market especially in the CV and tractor segments. Over the last few years however,
share of the unorganised players has been declining on the back of rising
disposable income levels, increasing quality consciousness, environmental
restrictions and better technology in the automotive industry.
September 2010 50
Transformation of an industry – Battery electric vehicle (BEV)
The size of world battery industry is expected to be about US $71bn in CY2009.

The global battery demand is expected to increase 4.8% annually through
CY2012. The migration from densely populated urban areas to the suburbs in the
cities has transformed people’s lifestyles and social interactions, even their
employment patterns. While the effects of modern automobile use continues to
generate philosophical discussions, perhaps the most controversial debate centers
around the impact that nearly one billion cars worldwide are having on the
environment. Environmental sensitivities have begun to drive demand for an
alternative to the conventional internal combustion engine (ICE) vehicles. Among
the front-runner technologies the battery electric vehicle (BEV) has zero emission.
Exhibit 11: Driving the world towards electric vehicles

Driver Development Impact in long term
1) Reducing anthropogenic CO2 emission.

2)Resource constraints making alternative fuel and power train
Environment concepts necessary.
1) National targets for BEV parcs
2) Government subsidizing and incentivizing Evs.
Policies 3) Regulation on CO2 emission standards.
1) consumers are getting more sensible for environment friendly
labels
Consumer 2)Reduction in total cost of ownership for BEVs expected
1) BEVs suits short distance commuters

2) People's average driving distance less than 50km
Urbanization 3) 60% of world population in cities by 2030 (70% by 2050)
Source: National Strategy Conference E-Mobility – United Nations, Angel Research
According to a market forecast, the BEV market will comprise approximately 13mn
vehicles in 2020. Given that total vehicle sales are estimated at around 100mn in
2020, the share of BEVs in the vehicle market is likely to be small, while ICE
vehicles continue to dominate the market for at least another decade.
By 2020, around 5% of the global auto production, or nearly two million cars, will
be electric. As per industry estimates, in India electric cars are expected to account
for less than 5% of the overall automobile market in the next 8-10 years. With
rising fuel cost and environmental concerns boosting demand for electric cars,
auto majors in India such as Mahindra & Mahindra, Tata Motors, Maruti Suzuki,
Hero Electric and Hyundai are assessing the electric car market. While the
domestic auto sales in India increased by 25% in value terms this year, the surge in
demand for auto components and accessories presents an opportunity for
partnerships that will help cut the manufacturing costs and boost energy savings.
September 2010 51
Exhibit 12: Electric vehicle model launches globally

Through -
Seg OEM CY2008 CY2009 CY2010 CY2011 CY2012 CY2012 ('in 000)
Qingyuan Happy Messen 335

Renault City EV 140
REVA G-Wiz 126
Think City 53
A/B
Mitsubishi iMiEV 30
Subaru R1e 12
Daimler Smart EV 30
Nice Cars Zero, Tata Nano, Mercedes A- Toyota iQ EV,
Other Tata Indica Nissan Cube /B-class EV VW up EV, 40
Wanxiang WXEV7050 130
Renault Megane EV 140
Tesla 10
Miles XS500 8
C/D
Toyota Prius Plug-in 10
BYD F3e, Kangoo EV,
F3DM, GM Ford Ford Mondeo
Other Volt/Ampera Connect EV PHEV 60
Wanxiang ZN5490EV 50
G/SUV Fisker Karma 30
Tesla Roadster 42
Source: Industry, OEM’s, Angel Research
A review of the key trends suggests that catalysts may be aligning for BEVs.
Economic trends such as strong and potentially rising oil prices, as well as a
pervasive awareness of environmental impacts and an ongoing, contentious
debate surrounding climate change are likely to keep the BEVs in the spotlight.
Policy changes, evolving technology and changes in the market from consumer
tastes to personal economics like-wise suggest that while the ICE will continue to
play an important role, it may no longer have the stage to itself. However, the
BEV’s distinctive characteristics, such as simplicity of its vehicle structure and driving
capability, could bring about major changes to an industry that has progressed
without significant changes for a century.
Exhibit 13: Traditional structure has to change – Opportunity for

existing and new battery manufacturers
Investment in energy storage
Utility
Consumers
companies Compensation
for electricity trade
Distribution for Infra- Demand- Reduced

new E-market structure pull life-cycle cost
Vehicle
manufacturers
New Battery
suppliers New market for manufacturers
other industries
Source: Industry, Angel Research
Nonetheless, battery technology is unable to keep up with the hybrid and electric
vehicle market (HEV). Improving infrastructure and growing power requirements
lead to greater instability in the batteries thereby limiting the miles covered. In case
of the BEVs, battery technology is not advanced enough to cover long distances on
September 2010 52
one charge. Increasing the number of cells to augment the energy capacity and
density of the batteries increases the weight of the vehicle rendering it incapable of
covering greater distances. The battery cost also increases, thereby discouraging
demand. However, since this is an upcoming segment, the level of enthusiasm and
investments or participants entering the market is at an all-time high. In 2004,
revenues generated by the World BEV/HEV battery market were approximately US
$349 million. Revenues are expected at US $1,867mn in 2011, logging a CAGR
of 27.1%.
Industrial batteries – Growing with economy

The industrial battery segment accounts for around 48% (approx. Rs3,500cr) of the
total organised Indian storage battery market. Demand for industrial batteries is
driven by industrial growth (reflected through IIP), infrastructure spending in the
telecom, railways and power sectors.
Industrial batteries are classified into conventional (lead acid), valve-regulated lead
acid (VRLA) and nickel-cadmium batteries. The VRLA batteries have been gaining
increasing acceptance and currently comprise ~75% of the Indian industrial
storage battery market Overall, the industrial battery sales majorly driven by VRLA
batteries logged CAGR of ~18.8% over FY2008-10.
The industrial battery market is highly concentrated with three-four players. Exide is
the market leader with a share of 40-45%. ARBL and HBL Power are the other
major players with a market share of 25-27% and 30-33%, respectively.
Telecom – Growth to taper off

The telecom batteries, which accounts for around 35% of the industrial battery
market, witnessed a boost in demand over the past couple of years on the back of
the boom in the telecom services sector. The telecom boom led to huge
investments being drawn up for setting up the network infrastructure to cater to the
increasing subscriber base and consequent increase in traffic. The telecom towers
form an essential part of the telecom infrastructure. Currently, there are ~300,000
telecom towers in the country. The unprecedented growth in the telecom
infrastructure led to a CAGR of 39.8% for telecom towers during FY2006-10.
Exhibit 14: Slowdown in tower addition to hit telecom battery demand

('000 units) Towers TeleDensity (%)
500 80
72
70
400 63
60
300
50
40
200
34
20
100 23
15
8
0 0
Source: TRAI, Crisil Research, Industry, Angel Research
September 2010 53
Going ahead, the addition of new towers is expected to slow down owing to
tapering subscriber growth and sharing of tower infrastructure becoming
imminent. Hence, we believe that future demand for telecom batteries would be
driven primarily by the surge in the replacement market. Moreover, with the roll
out of 3G and WiMAX services and sharing of tower infrastructure, the load on the
telecom towers is expected to increase and shorten the replacement cycle for the
telecom batteries. Thus, we estimate the replacement demand to pick up
depending on usage. Typically, an average replacement cycle spans 5-6 years
wherein a tower requires around two batteries of 24 cells (150-200 Ah/cell) and
battery back-up constitutes 10-15% of the total tower cost depending on the type
of tower (ground-based or roof-top tower).
The telecom batteries segment is dominated by three players, viz. HBL Power
(market share of 45-48%), ARBL (30-32%) and Exide (23-25%).
Railways – Infrastructure spending to drive growth

Batteries find application in railways where it is used to power coaches,
locomotives and signaling applications. The railways currently have around
45,350 new-age coaches (as on July 2008), representing a ready market for
batteries. This opportunity is expected to grow significantly as the Indian railways is
in the process of upgrading its infrastructure coupled with plans to add 22,869
coaches during the Eleventh Five-year Plan (2007-2012). Moreover, with the
recent initiatives of the government to expand networks, add new trains and
sectors, we expect the demand from railways to remain stable over the medium term.
Power – Power deficit scenario to boost demand

The power sector is a major user of storage batteries, which are used to supply
back-up power in UPS/Inverters. Storage batteries also support the transmission
and distribution (T&D) network of power stations.
Currently, India faces power deficit of 10.1%, driving the demand for batteries
used in UPS/Inverters. We expect the power deficit scenario to continue over the
medium term despite the ambitious capacity addition plans by the government in
the Eleventh Five-year Plan.
Exhibit 15: Power deficit scenario likely to continue

(bn units) Demand Supply Deficit (%)
1,200 11.1 12
9.9 10.1
9.6 9.8
1,000 8.5 10
800 8
8.3
7.0
600 6
400 4
200 2
0 0
Source: CEA, Crisil Research, Angel Research
Amidst the backdrop of power cuts and load shedding, we believe that demand for
UPS/Inverter batteries would continue to grow. Further, planned capacity addition
would also bolster demand for storage batteries required in the T&D networks.
September 2010 54
Key risks
Lead price volatility
Volatility in lead prices makes inventory management and pricing policy a

challenge for players, as lead and lead alloys are the primary materials consumed
in the manufacturing of batteries, representing 75–80% of overall raw materials
consumed. An increase in lead prices will impact margins, thus affecting
profitability and return ratios.
Cheap Chinese imports
Cheap imports from China are a concern for the industry. However, the price
differential has shrunk to 5–10% after China cancelled the export refund for all
lead-acid battery manufacturers in a bid to control high energy-consuming and
highly polluting products. Given the general industry concerns regarding the
quality of Chinese batteries, these imports are not likely to be a major threat over
the long term.
Competition to intensify due to new entrants
The industry is likely to witness increased competition over the medium term.
Buoyant demand outlook has prompted existing players such as Exide and ARBL to
increase their capacity. Among new players, Tata Autocomp plans to scale up to
2mn units by FY2011E. Among prominent global players, JCI and Exide
Technologies have already entered India through JVs with ARBL and Tudor,
respectively. Other global majors such as East Penn and EnerSys, might enter India
in the future owing to higher growth opportunity, which can intensify competition in
the industry.
September 2010 55
Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and
risks of such an investment.
Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make
investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this
document are those of the analyst, and the company may or may not subscribe to all the views expressed within.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals.
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,
nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While
Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,
compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or
other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in
the past.
Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
connection with the use of this information.
Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please
refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and
its affiliates may have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement Exide Industries Amara Raja Batteries

1. Analyst ownership of the stock No No
2. Angel and its Group companies ownership of the stock No Yes
3. Angel and its Group companies' Directors ownership of the stock No No
4. Broking relationship with company covered No No
Note: We have not considered any Exposure below Rs 1 lakh for Angel, its Group companies and Directors.
Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)
September 2010 56
Address: Acme Plaza, ‘A’ Wing, 3rd Floor, M.V. Road, Opp. Sangam Cinema, Andheri (E), Mumbai - 400 059.
Tel: (022) 3952 4568 / 4040 3800
Research Team
Fundamental:
Sarabjit Kour Nangra VP-Research, Pharmaceutical sarabjit@angeltrade.com
Vaibhav Agrawal VP-Research, Banking vaibhav.agrawal@angeltrade.com
Vaishali Jajoo Automobile vaishali.jajoo@angeltrade.com
Shailesh Kanani Infrastructure, Real Estate shailesh.kanani@angeltrade.com
Anand Shah FMCG, Media anand.shah@angeltrade.com
Deepak Pareek Oil & Gas deepak.pareek@angeltrade.com
Sushant Dalmia Pharmaceutical sushant.dalmia@angeltrade.com
Rupesh Sankhe Cement, Power rupeshd.sankhe@angeltrade.com
Param Desai Real Estate, Logistics, Shipping paramv.desai@angeltrade.com
Sageraj Bariya Fertiliser, Mid-cap sageraj.bariya@angeltrade.com
Viraj Nadkarni Retail, Hotels, Mid-cap virajm.nadkarni@angeltrade.com
Paresh Jain Metals & Mining pareshn.jain@angeltrade.com
Amit Rane Banking amitn.rane@angeltrade.com
John Perinchery Capital Goods john.perinchery@angeltrade.com
Srishti Anand IT, Telecom srishti.anand@angeltrade.com
Jai Sharda Mid-cap jai.sharda@angeltrade.com
Sharan Lillaney Mid-cap sharanb.lillaney@angeltrade.com
Amit Vora Research Associate (Oil & Gas) amit.vora@angeltrade.com
V Srinivasan Research Associate (Cement, Power) v.srinivasan@angeltrade.com
Mihir Salot Research Associate (Logistics, Shipping) mihirr.salot@angeltrade.com
Chitrangda Kapur Research Associate (FMCG, Media) chitrangdar.kapur@angeltrade.com
Pooja Jain Research Associate (Metals & Mining) pooja.j@angeltrade.com
Yaresh Kothari Research Associate (Automobile) yareshb.kothari@angeltrade.com
Shrinivas Bhutda Research Associate (Banking) shrinivas.bhutda@angeltrade.com
Sreekanth P.V.S Research Associate (FMCG, Media) sreekanth.s@angeltrade.com
Hemang Thaker Research Associate (Capital Goods) hemang.thaker@angeltrade.com
Nitin Arora Research Associate (Infra, Real Estate) nitin.arora@angeltrade.com
Technicals:
Shardul Kulkarni Sr. Technical Analyst shardul.kulkarni@angeltrade.com
Mileen Vasudeo Technical Analyst vasudeo.kamalakant@angeltrade.com
Derivatives:
Siddarth Bhamre Head - Derivatives siddarth.bhamre@angeltrade.com
Jaya Agarwal Derivative Analyst jaya.agarwal@angeltrade.com
Institutional Sales Team:

Mayuresh Joshi VP - Institutional Sales mayuresh.joshi@angeltrade.com
Abhimanyu Sofat AVP - Institutional Sales abhimanyu.sofat@angeltrade.com
Nitesh Jalan Sr. Manager niteshk.jalan@angeltrade.com
Pranav Modi Sr. Manager pranavs.modi@angeltrade.com
Sandeep Jangir Sr. Manager sandeepp.jangir@angeltrade.com
Ganesh Iyer Sr. Manager ganeshb.Iyer@angeltrade.com
Jay Harsora Sr. Dealer jayr.harsora@angeltrade.com
Meenakshi Chavan Dealer meenakshis.chavan@angeltrade.com
Gaurang Tisani Dealer gaurangp.tisani@angeltrade.com
Production Team:
Bharathi Shetty Research Editor bharathi.shetty@angeltrade.com
Simran Kaur Research Editor simran.kaur@angeltrade.com
Bharat Patil Production bharat.patil@angeltrade.com
Dilip Patel Production dilipm.patel@angeltrade.com
Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP000001546 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE: INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946
Angel Capital & Debt Market Ltd: INB 231279838 / NSE FNO: INF 231279838 / NSE Member code -12798 Angel Commodities Broking (P) Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302
September 2010 57

ExideInd Angel 280910

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

ExideInd Angel 280910

Hochgeladen von

Copyright:

Verfügbare Formate

Auto Ancillary

Volume ‘Lead’ growth Battery

Robust volumes, stable margins to drive earnings growth Recommendation Buy

High returns profile drives higher valuation, caps downside risks

Please refer to important disclosures at the end of this report 1

Strong performance by battery industry 4

Growth momentum to sustain 4

Stable lead price, backward integration helped margin expansion 6

Robust volumes to drive earnings growth 7

Expansion to capture volume growth 7

High returns profile drives higher valuation, caps downside risks 8

Stocks outperform on fundamental grounds – Exide excels 9

Exide re-rates on superior performance 10

Exide - ARBL valuation gap contracts 11

Exide Industries - Defensive appeal 14

Amara Raja Batteries - Catching up 30

Battery Industry - Overview 48

Automotive batteries – Riding secular growth in auto sector 48

Industrial batteries – Growing with economy 53

Strong performance by the battery industry

Growth momentum to sustain

Exhibit 4: Strong auto, industrial growth to boost battery industry’s revenue

Source: Industry, Company, Angel Research; Note : * CAGR

Exhibit 5: Angel’s Battery Universe – Financial Projections

Exhibit 6: Revenue growth trend

Source: Company, Angel Research; Note * CAGR

Stable lead price, backward integration helped margin

Source: Bloomberg, Company, Angel Research Source: Company, Angel Research

Robust volumes to drive earnings growth

Exhibit 11: Earnings growth trend

Source: Company, Angel Research, Note * CAGR growth FY10

Expansion to capture volume growth

We believe FY2011 will continue to be an investment phase for these companies,

300 274 75 150 75

Source: Company, Angel Research Source: Company, Angel Research

Source: Company, Angel Research Source: Company, Angel Research

Exhibit 16: Debt/Equity trend Exhibit 17: Asset turnover trend

Source: Company, Angel Research Source: Company, Angel Research

High returns profile drives higher valuation, caps downside risks

Exhibit 18: RoE Exhibit 19: RoCE

Stocks outperform on fundamental grounds – Exide excels

Source: Bloomberg, Angel Research Source: Bloomberg, Angel Research

Exhibit 22: Absolute and relative performance

Exide re-rates on superior performance

Exide - ARBL valuation gap contracts

Exhibit 28: EV/Sales Exhibit 29: EV/EBITDA

(x) Exide ARBL (x) Exide ARBL

Exhibit 30: P/E Exhibit 31: P/CEPS

Exhibit 32: P/BV Exhibit 33: PEG

Exide Industries ACCUMULATE

Please refer to important disclosures at the end of this report 14

Automotive OEM segment

Source: Company, Angel Research Source: Company, Angel Research

Automotive replacement segment

Industrial battery segment

Source: Company, Angel Research Source: Company, Angel Research

Market leader with wider reach and strong pricing power

Source: Company, Angel Research Source: Company, Angel Research

Captive lead sourcing reduces impact of lead price volatility

Source: Bloomberg, Company, Angel Research Source: Company, Angel Research

We have assumed a ~10% increase in lead prices in FY2011E, from

Exhibit 9: Impact of captive sourcing on FY2012E EBITDA margins

Captive sourcing (%)