Exide Industries, the market leader in the domestic storage battery segment is a major beneficiary of the growth in domestic automobile demand and replacement demand for batteries.

Due to strong growth in domestic automobile demand over last 7 years, replacement demand for batteries has been robust as replacement cycle for batteries is typically 4 years.

In replacement segments of trucks and tractors where penetration of organized players was limited, Exide has been able to improve its position by educating the customers about benefits of using a new battery as against locally assembled products.

Battery business has changed in the last five years with OEM business moving to pass through mechanism and this has insured company against raw material price volatility. By purchasing lead smelters, company has done backward integration and this has helped the company to gain better raw material security.

We expect company to have a CAGR of 25% during FY10-12.

The stock is currently trading at 15.5xFY12 earnings. We are positive on the stock with target price of Rs190.