Nomura Downgrades Exide Industries To 'Neutral' On Profitability Concerns

Nomura on Tuesday downgraded Exide Industries' stock rating from "Buy" to "Neutral" after the battery maker missed analysts’ estimates for the July-September period. The international research firm highlighted concerns over declining lithium cell prices and slower EV adoption, which it said pose risks to cell profitability.

Nomura also lowered its price target on Exide’s stock to Rs 439 from Rs 589, indicating a potential return of 0.5% from the last closing price. Profitability concerns in the Li-ion cell business have increased as prices of imported cells from China have fallen sharply in recent months, making import parity more challenging. Slowing EV adoption, particularly for passenger vehicles, adds a potential utilisation risk over the next one to two years, Nomura noted.

India’s public charging infrastructure, with just over 12,000 stations, falls significantly short of what is needed to meet the rising demand from EV growth, according to a report published in October by National Council of Applied Economic Research. "One of the largest obstacles to widespread EV adoption is the lack of a reliable charging infrastructure," the report said, adding "Consumers, especially in rural areas, continue to face range anxiety, worrying about running out of charge without access to a nearby station."

Nomura further adjusted its projections, lowering revenue forecasts for the current and next financial years by approximately 6% and reducing margin estimates by 90 and 60 basis points to 11.6% and 12.3%, respectively. This resulted in a reduction of around 13% and 12% in its EPS estimates. It also introduced estimates for the financial year ending March 2027, projecting a margin of 12.5%.

Last week, other brokerage firms, including Citi and Nuvama, also reduced their price targets for Exide Industries, reflecting concerns over moderating demand, higher-than-expected costs, and more cautious near-term earnings growth projections. This followed Exide’s report of a net profit of Rs 233 crore in the second quarter of the current financial year, a 13.7% decline from the previous year, which was below the Rs 259 crore forecast by analysts tracked by Bloomberg.

• Revenue rose by 1.8% to Rs 4,450 crore (Bloomberg estimate: Rs 4,549 crore).

• Ebitda decreased by 5.5% to Rs 472 crore.

• Margin contracted by 80 basis points to 10.6%.

• Net profit fell by 13.7% to Rs 233 crore (Bloomberg estimate: Rs 259 crore).

Shares of Exide Industries fell for the fifth consecutive trading session, declining by as much as 2.35% to Rs 421.70, compared to a 0.9% fall in the NSE Nifty 50 index. The stock has dropped 33% this year.