Exide Industries is entering a decisive phase in its multi-year transformation. ICICI Securities has reiterated a BUY rating on the stock with a 12-month target price of Rs 435, implying nearly 28% upside from current levels. The investment case rests on two parallel narratives: a steady margin recovery in Exide’s dominant lead-acid battery franchise and a long-gestation but strategically significant lithium-ion foray that positions the company at the center of India’s energy transition. With operating leverage improving, commodity volatility easing, and lithium-ion commissioning approaching, Exide is transitioning from a cyclical recovery story into a structurally stronger energy solutions platform.

Lead-Acid Franchise Shows Structural Resilience Despite Inflationary Headwinds

Exide’s legacy lead-acid battery business continues to demonstrate pricing power, scale advantages, and margin resilience.
The company operates in a duopolistic market structure with entrenched distribution networks across automotive and industrial applications. Automotive batteries contribute roughly 70% of revenues, while industrial segments account for the remaining 30%, providing diversification across demand cycles.

In Q3FY26, nearly 92% of Exide’s base business grew at approximately 12% year-on-year, driven largely by high-margin aftermarket demand. Replacement volumes in automotive batteries remain robust, supported by stable vehicle parc growth and normalization in OEM production. This favorable mix has cushioned margins even as raw material costs surged across silver, copper, tin, sulphuric acid, and currency depreciation.

Management expects 100–150 basis points of EBITDA margin expansion over the medium term, aided by operating leverage, calibrated price hikes, and internal cost-excellence initiatives.

Q3FY26 Performance Highlights Operating Leverage at Work

Quarterly earnings reflect a business stabilizing after prolonged commodity volatility.
Standalone revenue for Q3FY26 stood at Rs 4,030 crore, up 4.7% YoY. EBITDA rose to Rs 470 crore, with margins expanding sharply to 11.7%, up 220 basis points quarter-on-quarter. Profit after tax increased 5% YoY to Rs 258 crore.

While year-on-year margin comparisons remained flat, the sequential improvement underscores Exide’s ability to recover profitability once pricing actions and efficiency measures flow through. Gross margins improved by nearly 180 basis points QoQ, despite limited price pass-through during the quarter.

Automotive Aftermarket and OEM Wins Reinforce Volume Visibility

The automotive segment remains the cornerstone of Exide’s earnings stability.
Aftermarket volumes now account for approximately 73–75% of automotive sales, with OEM contribution at 25–27%. Improved OEM production in the second half has alleviated concerns around a future replacement slowdown.

Exide also announced key OEM wins, including becoming a 100% supplier for the Tata Sierra Petrol and the new Kia Seltos domestic model, both of which are witnessing strong market traction. These wins enhance forward volume visibility while reinforcing Exide’s position as a preferred supplier across vehicle platforms.

Industrial, Railways, and Data Centers Drive Non-Automotive Growth

Industrial applications continue to deliver double-digit growth outside the structurally declining telecom segment.
Railways remain a standout contributor, aided by a revised overhaul policy mandating battery replacement irrespective of remaining life. This policy shift has materially boosted tender activity.

Data centers now contribute Rs 75–100 crore per quarter, supported by India’s accelerating digital infrastructure build-out. While order conversion cycles remain long, management indicated a robust pipeline across hyperscale and enterprise customers.

Telecom revenues, now just ~1% of total sales, have largely bottomed out following the industry’s migration to lithium-ion batteries. Importantly, Exide has already pivoted toward supplying lithium-ion packs for telecom towers, mitigating long-term disruption.

Lithium-Ion Manufacturing: A Long-Term Optionality with Strategic Payoff

Exide’s lithium-ion investment positions it among the earliest large-scale domestic cell manufacturers in India.
The company’s greenfield lithium-ion cell manufacturing facility in Bengaluru is progressing steadily. The first 6 GWh phase (out of a planned 12 GWh) is on track for commissioning by the end of FY26, with cylindrical cell lines currently under validation.

Exide has already invested over Rs 4,250 crore, with total phase-one capex estimated at Rs 5,000 crore. The facility is designed to serve electric vehicles, grid-scale storage, telecom, and industrial applications, providing a diversified demand base.

While near-term margins and commercialization timelines remain uncertain, management has entered strategic cooperation agreements with Hyundai Motor and Kia, signaling strong customer interest. ICICI Securities continues to value this business conservatively on a CWIP basis, reflecting prudent risk assessment.

Capital Allocation Remains Disciplined Amid Heavy Investment Cycle

Exide’s balance sheet strength enables aggressive capex without financial strain.
The company remains net-debt free, with strong operating cash flows supporting ongoing investments. Planned capex for FY26–27 includes Rs 1,400 crore toward lithium-ion and approximately Rs 500 crore annually for the lead-acid business, largely aligned with depreciation.

Recent investments in automation, manufacturing upgrades, and process optimization have structurally improved Exide’s cost base, positioning the core business for sustained cash generation even during periods of demand volatility.

SOTP Valuation Supports Rs 435 Target Price

ICICI Securities values Exide using a sum-of-the-parts framework.

This valuation reflects conservative assumptions on lithium-ion monetization while fully capturing the earnings recovery underway in the base business.

Outlook: Recovery Today, Energy Transition Tomorrow

Management remains constructively optimistic about FY27 and beyond.
High single-digit to early double-digit revenue growth is expected as declining segments stabilize and lithium-ion commercialization approaches. With margins recovering, capex peaking, and strategic optionality embedded in its energy transition strategy, Exide is well-positioned for a multi-year earnings upcycle.

Key risks include slower-than-expected margin recovery in the lead-acid business and delays in lithium-ion plant commissioning. However, ICICI Securities believes the company’s scale, execution track record, and balance-sheet strength provide sufficient downside protection.