Exide has been an under performer in the current bull run. Though the stock has increased from the low of Rs 130 in March 20 (Covid led meltdown) to Rs 185 currently, it continues to be significantly low compared to the high of Rs 272 it had reached in August 2018.
Under performance since then was 1st due to slowdown in the Indian auto industry and then pessimistic views about battery companies. In case of Exide it was further accentuated due to it’s diversification towards non related life insurance business.
Tide may however be turning now. Reasons –
- Auto sector in general has been growing from strength to strength across segments. Upmove initially was considered as temporary. However, gradually now it’s been considered as structural tailwind and that too across all segments – cars, two wheelers, commercial vehicles, tractors etc.
- Exide has divested the life insurance business and has good liquidity to take care of growth, prepare for future and leverage on government’s PLI schemes.
- Exide’s closest competitor Amara Raja is saddled with political concerns and hence an advantage to Exide.
- Value buyers cannot have much concern about the valuations. Stock’s trailing PE continues to be below 20x.
- Even technically, stock continues to look very favorable for upmove.
Exide does seem to be a very attractive stock in current markets.