Bulls Eye calls are for medium term holding period of 4-6 months.

1. Bulls Eye Stocks – A Medium Term Investment Package

2. Amara Raja batteries, EXIDE (BUY) – Bulls Eye Call
Maximum Allocation :- 6-8 %
Entry : Buying Strategy
1st Phase (Now) of Accumulation :- 65% of Allocation.
These Calls needs to be accumulated slowly and if we are
seeing small dips, Investors can add more. The Second
phase of buying will be suggested later.
Exit : Selling Strategy
We would intend to exit around the end of CY-14 (or) at
around 35% profits from current Buy Levels. We believe
that the Returns can be even Higher with a slightly
longer Time frame considering the Quality.
Classification Type : Trigger based Positioning Call
One Liner on Call :- Considering that there are several
Triggers in place and also these are High Quality
Businesses, there is very little Risk involved with these
Stocks even in a choppy Market. At the same time,
these Stocks would benefit from a Rising Market.
Sub – Allocations :
Amara Raja Batteries :- 3-4 %
EXIDE Industries :- 3-4 %
Accumulation Range :
Amara Raja Batteries = 250-270
EXIDE Industries = 115-125
Significant Triggers –
• Lead Prices – Downward Bias.
• Replacement Demand Pick up.
• Inverter Sales Growth.
• Lower Competitive Intensity.
Strategy –
Use the Current Correction, to build
Positions in these High Quality Stocks.
Target Price/ Stop Loss –
Amara Raja Batteries = 320 / 210
EXIDE Industries = 155 / 80
Time Frame – 6 to 9 Months (See : Exit)

3. Core Investment Thesis
TacticalTriggers :-
Macro Event :- Auto sector revival, Interest Rates reduction.
Cyclical Factors :- Strong Pick-Up in Replacement Demand, Lead Price correction.
EntryTriggers :- Current Mid-Cap correction.Average Prices at >30% discount.
Two Stocks has been selected to play the Industry Sub-segment as such and not Bet on a Single Stock :
Lower Expectations – Exide Industries.
Higher Expectations –Amararaja Batteries
Amararaja & Exide continue to Quote at similar valuations
Amararaja Batteries – Has good Stock Momentum & StrongTechnical Chart.
Exide Industries – Can surprise with better Results leading to a Re-Rating.
Conclusion : Entire Markets have been in significant Corrective Phase, with the Small & Mid-Caps being
beaten down hard.This allows us to pick two Quality Mid-Cap stocks at good prices with Fundamental
triggers to move the share price up over the next few Months.While even if the Stocks don’t get Re-rated
substantially, we believe that going forward - Stock Picks would definitely Outperform the Market strongly.
Also, considering the Quality of the Business – there is little serious downside risk possible. So Investors can
continue to hold it for longer to get better returns.This in itself reduces the Risk substantially and allows our
Clients to build Positions at the current Prices.

4. Investment Analysis & Rationale

5. Lead Prices – Raw Material Impact
• Major Raw Material in case of Battery
Manufacturers is Lead. There is good
Earnings sensitivity based on Lead prices.
• Hence the Price of Lead has a serious
Financial Impact on the companies in the
short run of 2-3 Quarters.
• While the companies have decent
Pricing power in the Business to pass on
the Costs, it has a lag when the Prices
move sharply.
• Over the past 4- Quarters – Lead Prices
had a very sharp up move leading to
lower Margins and Pricing pressures.
• Recently, Lead Prices have started to
correct significantly and thereby
providing strong Operating Leverage for
the Battery Manufacturers to improve
their Margins and Profitability.

6. Replacement Demand
• One of the most Stable and Visible growth trigger for these companies in the short term is the
Replacement demand. Batteries usually have a life span of about 3-years and hence, we can visualize the
Replacement demand by looking at the historical Sales Nos. As shown in the Top, the Industry had very
strong Growth rates 3-Years back, leading to substantial Replacement demand over the next few Quarters.
Management confirms that the Replacement demand has started to Kick in. The main advantage of
Replacement is the Higher Margins which the segment provides to these Manufacturers.

7. Lower Competitive Intensity + Inverter Opportunity
• Exide had a Capacity crunch which led to its lower
focus on Replacement market as they had fixed
commitments to OEM’s leading to lower Margins.
But currently, both the companies have good
Capacity Utilizations and hence lower competitive
Intensity. This can be validated by the recent Price
Hikes taken by Exide Industries.

8. • Exide Industries has been the dominant Market
leader in the Battery business for several decades.
In the Organized space, it had very little
competition and its Brand is well established.
• But over the last few Quarters, with Capacity
constraints and Market share issues – the company
had lost a lot of Margins leading to sub-par
performance compared to its Peer.
• Traditionally Exide Industries used to be the
Trend setter in this Industry with the company
taking Price Hikes before its Peers and we believe
that, the company has got back some of its Pricing
power as seen in the recent price Hike.
• There was a lot of uncertainty concerning the
Insurance investment which the company has in
ING Vysya. While the main partner has sold its
stake, Exide is in search for new Partners and any
improvement here would certainly give a Boost.
Exide Industries – Snapshot (India’s No:1 Battery Company)

9. Amararaja Batteries – Snapshot (Strong Performance for last 2 Years )
• Amararaja Batteries has made strong inroads into
the Battery markets in a very short span of time.
The company has been consistently improving its
Market share for several years.
• The best part is the consistently higher Operating
Margins than Exide Industries, in spite of not being
the Market leader.
• Amararaja Batteries biggest strength is its
Technological tie-up with Johnson Controls which
is one of the Biggest Battery manufacturer globally.
• The company also has a good dominant Position
in the Telecom battery sector and also in the
Replacement market with its brand “Amaron”.
• Amararaja Batteries is also expanding its
Capacities to meet the additional demand and
position itself for Future growth. Company
continues to be aggressive to improve its Market
share in the Battery segment.

10. Overall View on Bets
• We are providing these Medium Term Investment calls
and considering the fact that there are Multiple
Triggers, Investors can start building positions.
• Since, we are bullish on the Sub-Category on the
whole – we are going ahead with 2-Stock Bets which
compromise the entire sector.
• Also, both these Stocks counterbalance each other to
an extent and hence lowers our Risk. Only when there
is some serious uncertainty over the Auto sector, the
stocks would have some downside left.
• Exide continues to provide Value and with near term
uncertainty of the Insurance business behind them,
they can certainly surprise on the Upside.
• Amaraja Batteries on the other hand continues to
perform well and with Momentum on its side, it can
certainly attract a lot of FII Interest on every dip.
• These stocks would ultimately provide Strong Returns
to Investors buying at current prices.

11. Technical View (Two Exactly Opposite Technical Charts)
Exide Industries - “Charts clearly shows the weakness in the Stock prices over the last several months and
this is mainly due to the disappointing Results which the stock has been posting. While we believe that levels
of 105 Rs would continue to act as Strong Support for the Stock”.
Amararaja Batteries – “The stock has a very Strong Technical chart with – Higher Tops and Higher Bottom
which shows the counter’s strength. We believe that this would continue, at least for the next 2 Quarters”.

12. Fundamental Earnings View
Amararaja Batteries
Exide Industries

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