- Revenue grew only 5% YoY despite a post‑GST auto demand surge.
- Profit after tax (PAT) missed estimates: INR 2.6 bn vs. INR 2.8 bn forecast.
- Margins stayed near forecasts, but the growth story is fragile.
- SOTP model values core lead‑acid, EV, and HDFC Life stake at a combined INR 341 per share.
- Neutral recommendation persists; bullish case hinges on EV ramp‑up, bearish case on export weakness.
You overlooked Exide's stagnant revenue, and that could cost you big.
Exide Industries' Q3FY26 Performance – Numbers That Matter
Motilal Oswal’s latest research shows Exide Industries posted a PAT of INR 2.6 billion for the quarter, falling short of the INR 2.8 billion consensus. The shortfall stems primarily from a modest 5% YoY revenue increase, far below the growth rate the auto sector enjoyed after the GST rate cut.
While operating margins aligned with expectations, the top‑line lag highlights two critical drags: weaker export shipments and a continuing slump in the telecom battery segment. Export volumes fell as global OEMs tightened inventory, and telecom customers delayed network upgrades, squeezing a historically lucrative revenue stream.
Why the Lead‑Acid Core Remains a Double‑Edged Sword
The lead‑acid battery business, Exide’s historical backbone, is valued at 15x the projected Dec‑27 earnings per share (EPS). This multiple mirrors peers such as Amara Raja, reflecting an industry‑wide valuation consensus for mature, low‑growth battery makers. The upside potential lies in steady demand from two‑wheelers and commercial vehicles, but the downside is the inevitable shift toward lithium‑ion solutions.
Lead‑acid battery: a traditional, heavy‑duty energy storage device, cheaper than lithium‑ion but with lower energy density and shorter cycle life. Its relevance is waning in electric mobility, yet it still dominates in starter‑motor applications and backup power.
EV Business – The Growth Engine That Could Redefine Valuation
Motilal Oswal adds INR 59 per share for Exide’s nascent electric‑vehicle (EV) battery division, using a book‑value approach. The EV segment is still small—accounting for roughly 6% of total revenue—but the market’s CAGR (compound annual growth rate) is projected at 30%+ through 2028.
Key catalysts include:
- Government incentives for electric two‑wheelers and buses.
- Strategic partnerships with domestic EV OEMs.
- Potential scaling of a lithium‑ion plant slated for 2025.
If the EV line captures just an additional 3% market share of Indian two‑wheelers, Exide’s top‑line could accelerate to double‑digit growth, validating the SOTP uplift.
Telecom Segment Decline – A Warning Sign
The telecom battery business contributed INR 1.1 bn to revenue last quarter, down 12% YoY. The slowdown mirrors a broader industry trend: operators are postponing network expansion due to high CAPEX and shifting focus to software‑defined networking.
While the segment still offers attractive yields, its contraction erodes the cushion that once balanced the cyclical nature of auto demand. Investors should monitor upcoming 5G rollout schedules—any acceleration could revive telecom battery orders.
Sector Trends: Auto, Battery, and the GST Effect
The GST rate cut on two‑wheelers (from 28% to 18%) sparked a short‑term demand surge across the auto market. However, the benefit has been uneven. Companies heavily reliant on starter‑motor sales, like Exide, saw only marginal top‑line lift because the price sensitivity of end‑consumers curbed volume growth.
Simultaneously, the battery sector is undergoing a structural shift:
- Lead‑acid volumes are plateauing, with a 2‑3% annual decline forecast beyond 2025.
- Lithium‑ion adoption is accelerating, driven by EV subsidies and stricter emission norms.
- Export markets—particularly in Africa and the Middle East—are tightening credit, reducing order pipelines.
Competitive Landscape: How Tata, Amara, and Adani Are Positioning
Tata Power’s battery arm is aggressively investing in lithium‑ion capacity, targeting a 20% share of the Indian EV battery market by 2027. Amara Raja, Exide’s direct peer, has already secured multiple OEM contracts for lithium‑ion cells, cushioning its lead‑acid decline.
Adani’s entry into the green‑energy storage space adds another layer of competition. Although Adani focuses on utility‑scale storage rather than automotive batteries, its scale and capital advantage could pressure pricing across the battery value chain.
Exide’s advantage lies in its entrenched distribution network and brand loyalty among two‑wheeler manufacturers. To stay competitive, the firm must accelerate its lithium‑ion transition while leveraging its lead‑acid cash flow to fund R&D.
Historical Parallel: The 2018 Lead‑Acid Crunch
In FY18, Exide reported a similar revenue‑growth lag amid a surge in two‑wheeler sales. The company’s response—doubling down on R&D for high‑performance lead‑acid batteries—yielded only a temporary uplift. It wasn’t until the firm entered the EV battery niche in FY20 that earnings momentum recovered.
The lesson: reliance on a single technology in a shifting regulatory environment can stall growth. Investors who missed the 2018 slowdown and re‑entered during the EV pivot realized a 45% share‑price gain over three years.
Valuation Deep‑Dive: SOTP Model Explained
The Sum‑of‑the‑Parts (SOTP) valuation separates Exide into three components:
- Core lead‑acid business: 15x Dec‑27E EPS, reflecting mature‑industry multiples.
- EV battery division: Book‑value uplift of INR 59 per share, acknowledging growth potential.
- HDFC Life stake: Market‑linked addition of INR 52 per share, providing a non‑operational earnings buffer.
Adding these yields a target price of INR 341, aligning with the analyst’s neutral stance. The model assumes the EV segment will achieve break‑even by FY30 and that the HDFC Life stake will maintain a 10% annual return.
Investor Playbook – Bull vs. Bear Cases
Bull Case: A successful EV rollout, accelerated 5G telecom upgrades, and a rebound in export orders push top‑line growth to 12% YoY. The EV division reaches profitability by FY29, expanding the SOTP uplift to INR 90 per share. Share price could test INR 380, delivering a ~12% upside from the current level.
Bear Case: Export markets remain constrained, telecom orders stay flat, and the EV unit fails to scale, keeping revenue growth under 4% YoY. Margin pressure from raw‑material cost inflation erodes profitability, pulling the target down to INR 290, a ~15% downside.
Strategic takeaways:
- Maintain a core position at the current price to capture upside if EV momentum materializes.
- Set a stop‑loss near INR 260 to limit exposure should export and telecom tailwinds stall.
- Consider a partial hedge with a lithium‑ion specialist (e.g., Amara Raja) to diversify battery‑sector risk.
In summary, Exide’s modest revenue rise masks underlying sectoral headwinds and a pivotal growth fork. Understanding the SOTP components, competitive dynamics, and historical patterns equips you to decide whether to stay the course or reallocate capital.