Exide Pakistan reports hefty 52% increase in profitability

By Kazim Alam, The Express Tribune

KARACHI: Off the radar screens of most brokerage houses and asset management companies, one dark horse in Pakistan’s equity market continues to race for all it is worth. Exide Pakistan, arguably the largest manufacturer of lead acid electric storage batteries in the country, on Monday announced an increase of over 50% in profit after taxation for its financial year, which ended March 31.

Exide Pakistan produces batteries for cars, tractors, trucks, buses, earth moving equipment and off-the-road vehicles, besides producing special application industrial batteries for stand-by power, locomotive engine starting, and for train-lighting systems.

The company’s after-tax profit for the latest financial year remained Rs486.4 million, up 51.9% from the preceding year’s Rs320.1 million. Its top-line increased 17.7% to Rs11.1 billion, from last year’s Rs9.4 billion. A massive increase of 52% in the company’s profitability came on the back of a substantial decrease in its finance cost, which dropped from Rs157 million to Rs38.3 million, down 75.6% year-on-year.

The company reported a significant increase in the earnings per share from Rs45.3 per share in fiscal year 2012 to Rs68.8 per share in fiscal year 2013. The company also announced a final cash dividend of Rs6 per share, or 60% of its stock’s par value.

“Going forward, the company is expected to report improvements in earnings backed by a persistent increase in the number of vehicles on roads,” Muhammad Ali Taufiq told The Express Tribune on Tuesday. Taufiq is head of equity strategy (retail) at Elixir Securities, a brokerage house associated with the Dawood Group of Companies. He added that earnings will keep rising in case electricity shortages continue to persist in the country.

For the financial year that ended on March 31, 2005, the company’s profit after taxation was Rs53.9 million. This means that the net profit of Exide Pakistan has grown 31.6% per annum on average for the last eight financial years.

The per-share price of Exide Pakistan was Rs436.5 at the end of the trading session on Tuesday. It was Rs62 on July 1, 2005. Thus, the average increase in the company’s share price during the last eight years has been 27.6% annually. Meanwhile, the KSE-100 Index increased from 7,464.5 points on July 1, 2005, to 21,644.17 points at the end of the trading session on Tuesday, reflecting an annual increase of 14.2% on average for the last eight years. In other words, the company’s stock appreciated almost twice the rate at which the KSE-100 Index has gone up over the last eight years.

“We expect the stock to touch a level of Rs540 per share over the next one year, from the current price of Rs436.5 per share. Our brokerage fund has a ‘buy’ stance on the stock,” Taufiq said.

Exide Pakistan is a relatively illiquid stock, and the volume of everyday trading is comparatively small. Of its total free-float of 7.06 million shares, only 5,600 shares were traded on Tuesday.

“With an expected dividend yield of 2.2%, the stock offers highly attractive returns. Our estimate for earnings per share for fiscal year 2014 is Rs80 per share,” Taufiq added.

Published in The Express Tribune, July 3, 2013.


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