Exide Industries is well known company and already many have written expert threads over here. Few important points to take a note as per May-2023 con-call:
There is a general pessimism on terminal value of lead acid battery business after EV. But management clarified that “Every EV requires 1 auxiliary battery, which is lead acid battery”.
Though company is not beneficiary of PLI scheme, in India seems they are early adopters to Lithium Iron cell technology and ahead of competitors as of now.
Note - Company corrected its historical diworsification mistake by selling off insurance business to HDFC Life Insurance. So corporate action seems to be good.
Question - Does this company is showing optionality element, as seems its current business may not get disturbed but company may also accelerate in new technology? Valuations also seems to be reasonable.
Exide created a new subsidiary called Exide Energy Solutions Limited (EESL). They initially invested Rs. 1,530 crore in EESL to set up a greenfield Lithium-ion cell manufacturing facility in India.
Now, the company plans to invest an additional Rs. 1,100 crore in EESL. This investment will bring the total equity investment in EESL to Rs. 3,000 crore.
The assumption of “Every EV requires a auxiliary lead acid battery” is a bit unrealistic. My be the lead acid 12V batteries will go , the current constraint is legacy low voltage design architecture. (subcomps that are designed for legacy 12V system)
But for an EV it looks like a burden, because , in spite of having a large HV pack , we have a 12V lead acid battery and a DC2DC converter (to support legacy LV architecture). may be in India it might happen slowly, but there is a possibility it can happen fast, because at the current state of EV technology , the electric cars are unaffordable, so large optimization will happen from what Tesla has industrialized.
Meanwhile, I think Exide is expensive, considering its single digit profitability, high capital intensity, very little growth and uncertainty of future market for its current legacy products…
Hyundai Motor Company and group firm Kia Corporation have signed a Memorandum of Understanding (MOU) with Exide Energy Solutions Ltd, as part of their electric vehicle (EV) expansion plans, Hyundai Motor Group said in a statement.
Hyundai Motor and Kia aim to localise their EV battery production, specifically focusing on lithium-iron-phosphate (LFP) cells in line with the expansion of their EV plans for …
While I know that the company is very pro Li-ion batteries and has been investing heavily in the EESL plant, I recently came across a report which suggest that the price of Li-ion batteries have fallen significantly.
source: Navuma Research
While the production has not stared for EESL, my view here is the inventory realizations have gone down significantly for batteries. Does that pose a threat to the companies margins? There is over supply in the market for these kind of batteries from Chinese players which is leading to such low realization.
My concern is oversupply as anti-thesis has started to playout, so should be concerned in the future margins from the new capacity.
Disc: I am invested in Exide since 2022 (at 190s levels)
Hyundai-Exide supply agreement moved one step to binding term sheet before definite agreement.
“We wish to inform you that EESL has executed a binding term sheet (Term Sheet) on 19”'December 2024 with HMIL, i.e. Hyundai Motor India Limited, a company belonging to the Hyundai Motor Company group, recording a binding commitment by EESL and HMIL (together, Parties) to enter into definitive agreements pertaining to the production and supply of battery cells for HMJL’s electric vehicles dedicated to the Indian market (Definitive Agreements). The Term Sheet formalizes the intent of HMlL to onboard EESL as a supplier of 706b0258-bec5-4993-9dcd-db69dc5ecf2e.pdf (702.8 KB)
lithium-ion cells and battery packs for use in its electric vehicles.
The proposed arrangement, once the Definitive Agreements are executed, is expected to accelerate the development and production of electric vehicles, contributing to the growth of sustainable transportation solutions in India."
