Investec bets on this battery maker for 25% potential gains

After gaining as much as 4 per cent in early trade, shares of the battery company Exide Industries traded flat in a weak market. At around 2:26 pm, shares traded with gains of 0.6 per cent at Rs 362.35, up 0.6 per cent. Shares got a push as domestic brokerage Investec recommended a buy on the stock for 25 per cent potential upside.

Restructuring 
 

Investec pointed out that in order to increase operating efficiencies, the company is engaging in business restructuring. Furthermore, it is focussing on creating a B2B, B2C and international framework for operations.

Lithium-ion cell plant on track

Since the second half of FY26, Lithium-ion cell 's first phase production will commence.

Margin tailwinds

The brokerage believes that amid strong replacement demand, EBITDA margin may be increased. Also, the company's transition to a higher margin category will enable margin expansion at the battery entity.

Further, estimates suggest that margin at the company may grow to 13.1 per cent in FY27 from 11.7 per cent in FY25.

Also, the government has relaxed safe harbour norms for EV and EV battery companies.Also, the threshold limit has been increased to Rs 300 crore from the earlier Rs 200 crore.

Margin mix – Exide Industries
 
Batteries                40% of revenue
OEM                         15% of revenue

Ebitda margin comparison
 
                         Exide                             Amara Raja       
                
FY23                10.7%                               13%
FY2 4                11.4%                              14.4%