Exide Industries Ltd (CMP: Rs.89.05): Basking on the Auto Sector boom:

Buy only in a correction....Book Profits now...

Exide Industries Ltd is expected to benefit from the better‐than‐expected pick‐up in the car sales (I have earlier mentioned about Refex Refrigerants Ltd on this issue). In the original equipment (OE) sector, demand is weak in the truck‐bus, tractor, and multi‐utility vehicle segments (Not so good news for the shareholders of Sicagen India Ltd).

However, the recent turnaround of the passenger car segment and a robust growth in sales of two‐wheelers will contribute to the sales growth of the company (Good news for the share holders of Refex Refrigerants Ltd). With a likely turnaround in the auto sector, Exide plans to spend around Rs.100 crore to create more capacity given that it is already using about 90 per cent of its facilities. Exide has facilities in Shyamnagar and Haldia in West Bengal, Hosur in Karnataka, Chinchwad and Taloja in Maharashtra and Bawal in Haryana. The company needs additional capacity to meet its demand from an increasing demand of both automotive and industrial batteries.

Exide controls 76 per cent of the automobile OE market. Sales of batteries are expected to grow by about 15 per cent in the current year due to strong demand from original equipment manufacturers (OEMs).

Strong demand from the UPS & inverters segment from commercial establishments is also estimated to grow by 20 per cent leading to a much strong revenue growth.

Exide has also tied up with Thunder Sky of China for importing Lithium‐ion automotive batteries keeping in tune with the interest shown by domestic car‐makers to participate in the demonstrative electric car project during the Commonwealth Games 2010.

In any good correction buy around the support of Rs.63--Rs.65--Rs.80, for a target of Rs.110, in the next 6 months time frame.