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Topic: PAGE vs EXIDE – Which business is good?

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subu76
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Posted: 11/Jun/2011 at 8:41am

Manish, good point on Excide's capital efficiency. I looked up their account and fixed cap expenditure to disprove your theory and found that they indeed have the ability to fund their growth easily.....this year they're planning to invest 300 cr in capacity expansion as they've used up their current capacity almost fully...the other advantage of increasing their output is that they'll be able to serve the replacement market (which has better margins) better

An important aspect about this company is the way they've consistently reduced their Working Capital/Sales. Normally one would have expected these to be directly proportional more so for a company which has substantial B2B sales . Do you know how they've achieved this?

Not sure about PE but the company surely seems to have earning upside from here...

Personally, i have some sort of bias against car companies. I bought a car about 6-7 years back for about 6-7 odd lakhs and i find a more improved version of the car still sells at the same price.....As per Excide accounts average prices have moved only marginally over 2007-2010. Offcourse, excide is not just about new cars and the thought process downplays the growth opportunity for this sector.

Comparing the 2 companies which are totally disparate is really hard yaar...... For any such exercise please choose similar market cap or similar profit or similar industry companies

Edited by subu76 - 11/Jun/2011 at 8:46am

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manish_okhade
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Posted: 11/Jun/2011 at 9:21am

Originally posted by subu76

You are trying above the pricing power but havent you noticed that for example take any Maruti Car, it would have become cheaper by now what it was few years back, true but is it reducing the profit margine of the company? Answer is no.

Fixed assets of EXIDE have trippeled in last 5-6 years but their working capital has become only 2.5 times what it used to be 5-6 years back. It means their operation does not find hard to meet day to day cpital arrangement and the bonus is return over working capital, its simpley fabulous!!! Compare it with many other companies, its mostly sub 30-50% only.

Also look at the PM for EXIDE it has grown 40% in these 5-6 years i.e. 8+% to 14+%.

So the bottomline is EXIDE is growing the net assets due to capcitiy expansion and they need small dose of debt and capaex for plant maintenance. Growing PM and very high return on working capital is what an investor should lok for, should't it?

Purpose comparing Page to EXIDE is that as an investor one should see which business is more strong and lucrative. Investor is not marrying to any segment instead focus on RoIC on his invested sum in LONG term.

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subu76
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Posted: 11/Jun/2011 at 9:30am

I agree on the work cap performance...do you know how it was acheived? I's expecting working capital to rise it to be in line with their sales growth but that is not the case...

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manish_okhade
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Posted: 11/Jun/2011 at 9:36am

Come on Subu! You are asking obvious things.

Working capital is typically made up of inventory, sundry debtors and less current liabilities. Following is the reasons for high values:

1) EXIDE should be getting cash upfront hence they don't need to struggle for money. Mostly manufactures dump the product to the dealers/end customers on credit but that does not seem to be the case with EXIDE.

2) EXIDE is definitely having pricing power. If you look at the growth rate theey i got shocked and still wondering why EXIDE is quoting so cheap?

Net Profit     155.21     250.33     284.39     537.09     666.36
                          61.28%     13.61%     88.86%     24.07%


Edited by manish_okhade - 11/Jun/2011 at 9:38am

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values
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Posted: 11/Jun/2011 at 10:24am

Manish Sir, how would you compare Amara Raja vs Exide ? I am sure you have some information on Amara Raja as well considering you are so excited in Exide ?

Knowledge is power!

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subu76
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Posted: 11/Jun/2011 at 10:24am

No yaar.....revenues/total number of units produced is almost same over the years

I'm really doubtful that large OEMs who are bulk buyers would make upfront payments

The growth rate is probabily a reflection of the growth in the overall automotive market as this company is a leader in the space

I think the Working capital improvement might have more to do with good systems integration with the OEMs and overall prosperity in this sector (which all resulted in timely payments)

My understanding is that the numbers we're currently looking at are all good times numbers and no cyclical down turn occured during these time (which is not to say that one will happen anytime soon)

Edited by subu76 - 11/Jun/2011 at 10:28am

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smartcat
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Posted: 12/Jun/2011 at 5:50pm

According to car enthusiasts, Amaron is a better battery than Exide - because it lasts really long (ting tong).

However, Exide has stronger OEM tie-ups.

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photon
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Joined: 10/Jun/2010
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Posts: 275

Posted: 19/Aug/2011 at 8:49pm

So what is the verdict ? Without any bias towards Page (which is a great stock and I own it), I feel Batteries is a very interesting play and consumption per capita is minuscule in India.

Moreover I think there is some moat around the business as Manish Ji mentioned:
1. It is not just product quality - Distribution network, Technology, guarantee - These take time to build.
2. Consumers are becoming more brand conscious - How many of us will use a local battery in an inverter or car ?
3. Exide (and Amara raja) are cash rich, great financial efficiencies, decent growth but geting clubbed with rest of "auto basket".

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