Exide Industries’ shares recently hit a five-month low following a lacklustre earnings report for the second quarter of the fiscal year. As one of India’s leading battery manufacturers, Exide’s financial performance is closely monitored by investors, many of whom choose to buy shares online. Despite an increase in standalone net profit, Exide’s results fell short of market expectations due to muted demand from its automotive clients.
Exide Q2 profit fails to meet market expectations
On November 4, Exide Industries announced its Q2 results for the July-September quarter, revealing a standalone profit after tax of ₹298 crore, marking a 3.8% increase from the previous year. While this was an improvement, it fell short of analysts’ predictions of ₹309 crore, compiled by LSEG. The earnings miss impacted investor sentiment, with Exide’s shares tumbling by up to 4.6% to ₹437.80, the lowest level since June.
Exide derives nearly 70% of its sales from the automotive sector, which has faced challenges due to high inventory levels among car dealers. As the automotive industry scaled back on dispatches to manage unsold inventories, demand from Exide’s core clients saw a slowdown. This drop in demand also affected Exide’s revenue for the quarter, which came in at ₹4,267 crore, below the market forecast of ₹4,439 crore.
Challenges in automotive demand weigh on Exide's growth
The drop in automotive demand has been attributed to excess inventories in distribution channels, which prompted car manufacturers to limit new deliveries. This resulted in fewer battery orders for Exide, a trend that investors who buy shares online are carefully observing as it may impact the company’s near-term growth potential.
In contrast, Exide reported “robust” replacement demand, where consumers replace older vehicle parts, providing a steady revenue stream despite lower demand from new automotive sales. This segment's strength has provided some resilience to Exide’s earnings, even as the automotive sector faces headwinds.
Exide shares decline, reaching 5-month low
Following the earnings announcement, Exide’s stock price reached a five-month low, with shares declining as much as 4.6% to ₹437.80 on the day. Investors who buy shares online have seen Exide’s stock trend downwards over the last few months, driven in part by ongoing uncertainties in the automotive sector. As a significant part of Exide’s revenue stems from car manufacturers, the performance of the automotive sector remains critical for the company’s overall outlook.
What the future holds for Exide Industries?
The current challenges in the automotive industry may continue to pose risks for Exide Industries in the short term. However, the company’s strong position in the replacement demand segment could offer some stability. Investors interested in diversifying their portfolios may find this an opportune moment to buy shares online, considering Exide’s standing as a leading player in India’s battery market.
For those looking to buy shares online, the present valuation could be seen as a potential entry point, although risks from the automotive sector’s performance should be weighed carefully. As the automotive sector stabilises, Exide’s financial performance could see an uplift, but market conditions and inventory levels will play a crucial role in shaping the company’s near-term growth.
For android only