Sector: Auto Parts & Equipment /Mid-Cap | Earnings Update 1QFY20 Background: Amara Raja Batteries Ltd (ARBL) is the second largest automotive battery manufacturer and the largest supplier of industrial storage batteries in India. The company supplies auto batteries to OEMs such as Ford, Hyundai, Honda, Mahindra & Mahindra, Maruti Suzuki, Ashok Leyland and Tata motors amongst others. Its Industrial division consists of brands such as PowerStack, Amaron Volt, Amaron Sleek, Amaron brute and Amaron Quanta. Company's business model is de-risked as it caters to automotive as well as industrial segments. The company's products are exported to most...

Amara Raja's Q1FY20 result was broadly in-line of our expectations; however net sales was better than our estimate by 5.3%. Its net sales stood at Rs18.1 bn (+2.0% YoY, 15.8% QoQ) led by higher automotive and export sales. EBITDA was in-line with our forecast at Rs.2.7 bn (+26.8% YoY, +15.3% QoQ); EBITDA margin improved 300bps YoY to 15.4% mainly on price hikes and lower prices of key raw material, lead. Net profit increased 24.7% YoY to Rs 1,409 mn. As Q1FY20 result was in line with our expectation, we broadly maintain our FY20/FY21 forecasts. We continue to value the stock at PE of 18x on our FY21E EPS and maintain...

Amara Raja reported strong results in 1QFY20 in challenging conditions. Net profit jumped 25% YoY to ` 1.4bn, due to sharp margin expansion of 300bps and a low base. We remain positive about the Indian batteries market, as we expect 1) replacement demand to further improve, given healthy primary sales in the past three years, 2) a market share gain from unorganized players, after GST, and 3) an uptick in the nascent e-rickshaws /solar batter. We forecast Revenue/EBITDA/PAT CAGR of 8%/11%/10% over FY19-21E. At CMP, the stock trades at 19/18x for FY20/21E EPS (vs 5...

20 July 2019 to just 2% YoY (INR18.2b v/s our estimate of INR17.4b). 4W battery volumes increased 5% YoY, driven by growth of 10-11% YoY in aftermarket and 22% YoY in exports, partly offset by an 18% YoY decline in OEM volumes. 2W volumes were up 6-7% YoY, driven by 20% YoY growth in aftermarket, despite 25-28% YoY decline OEM volumes. Industrial volumes increased 11% YoY, driven by 25% YoY growth in UPS, despite 8-9% YoY decline in telecom battery volumes. Lead prices were lower by 10-12% YoY. Operating leverage and change in lease accounting (20-25bp benefit) drove 15.1%). Implementation of AS116 (lease accounting) resulted in higher depreciation (by ~INR40m) and interest cost (by ~INR10m). Adj. PAT increased (a) AMRJ recently reacted to the 5- 6% price cut in the 2W replacement market by EXID. (b) Realized lead price was at INR141-143k/ton (v/s INR154k in 4QFY19).

Sector: Auto Parts & Equipment /Mid-Cap | Earnings Update 4QFY19 Background: Amara Raja Batteries Ltd (ARBL) is the second largest automotive battery manufacturer and the largest supplier of industrial storage batteries in India. It is a joint venture between the Galla family and US based Johnson Control (JCI) with 26% each. JCI, the global leader in lead-acid automotive batteries and advanced batteries for start-stop, hybrid and electric vehicles, provides technical support to ARBL. Company's business model...

Amara Raja Batteries Ltd (ARBL) is India's second largest Lead-acid battery manufacturer. Its segment includes automotive and industrial lead acid batteries, with market leadership in Telecom segment. During Q4FY19, ARBL reported a muted revenue growth of 0.9%YoY, (below our estimate) on the back of lower auto sales from manufacture's and weak contribution from telecom segment . However EBITDA margin expanded by 200bps to 15.5% due to sharp decline in Lead price and better operating efficiencies....

Weak OEM, Telecom impacts revenue growth; Mix, decline in RM drives margins First revenue decline since 1QFY10: Revenues declined by 1% YoY to INR15.7b (our est. INR16.9b), impacted by lead price pass-through (in 40-50% of the business). The healthy volume growth in aftermarket (4W 11-12% YoY, 2W 18-20% YoY) and exports (15-20% YoY) was offset by ~10% YoY decline in...

Replacement demand, benign lead prices to support! ARBL's segment mix was at ~75% automotive and ~25% industrial. Replacement demand forms a lion's share of automotive demand at ~70% while OEM demand makes up the rest. The auto OEM space has been witnessing muted demand since Diwali, thereby having a knock-on impact on ancillary players including battery makers. OEM demand is expected to remain subdued in the next few quarters amid vast regulatory changes (ABS, BS-VI) and general slowdown in consumer discretionary expenditure....

Broadly in line with our estimates; Accumulate Amara Raja's Q4FY19 results were broadly in line with our estimates. The net revenue was ` 15.6bn (-1% YoY due to muted revenue from the automotive OEM segment and the telecom segment, offset by decent growth in the automotive replacement and inverter sales. The APAT grew 7% YoY to ` 1.20 bn, due to margin expansion. We remain positive about the Indian batteries market, as we expect 1) replacement demand to further improve, given healthy primary sales in the past three years, 2) a...

In November 2018, Johnson Control had entered into an agreement with Brookfield Business Partners LP and institutional partners (collectively Brookfield) to sell its entire stake in the power solution business and focus on its core capability. The said transaction included transfer of the entire automobile battery business to Brookfield. It valued power solution business at US$13.2 billion, which clocked sales of US$8 billion in CY18 with corresponding EBITDA at US$1.7 billion (EBITDA margins 21%). On the valuation front, the said business was acquired at ~1.6 EV/sales and ~8x...

Amara Raja Batteries (ARBL) reported steady results for Q3FY19 Revenues came in at | 1,695 crore (up 9.1% YoY, down 3.3% QoQ) According to the management, the automotive segment displayed strong volumes during the quarter, especially in the aftermarket space. Industrial segment growth was steady in comparison EBITDA rose 4.6% YoY to | 253 crore. The EBITDA margin contracted 64 bps YoY but expanded 142 bps QoQ to 14.9%. On a YoY basis, margins were impacted due to higher raw material cost...

Revenue in line lead price shows resilience Amara Raja Batteries Ltd (ARBL) is India's second largest Lead-acid battery manufacturer. Its segment includes automotive and industrial lead acid batteries, with market leadership in Telecom segment. ARBL has approved an investment of Rs540cr for the deployment of...

Outlook and valuation: We believe Amara Raja holds durable competitive advantages over peers, with strong brand, technical expertise (via parent JCI global brand) and its lower cost structure (compared to its peers). We expect margins to improve in H2FY19 (despite weak H1FY19 margins) on price hikes, falling lead prices (down 6% in last 3 months) and cost improvement measures taken by the company. The company foresees opportunities in the energy storage and electric vehicles space. We maintain our ACCUMULATE rating on the stock with a revised target...

ICICI Securities Ltd | Retail Equity Research Amara Raja Batteries' (ARBL) revenues grew 22.8% YoY to | 1,753 crore vs. our estimate of | 1,691 crore. Overall volume & price mix was at ~16% & ~7%, respectively. According to the management, its 2-W & 4-W business grew ~13% YoY & ~19% YoY, respectively, while the industrial segment grew ~35% YoY led by telecom, UPS & Railways. The growth in telecom is attributable to low base of last year and is getting stabilised now. Further, exports grew ~40% YoY...

ICICI Securities Ltd | Retail Equity Research Amara Raja Batteries' (ARBL) revenues grew 18.8% YoY to | 1,779 crore vs. our estimate of | 1,747 crore. According to the management, automotive battery business achieved strong volume growth (~31% YoY) across its business segments. Its industrial segment stayed flat YoY, after ARBL saw double digit de-growth in telecom space. However, it was offset by growth in other segments. EBITDA margin contracted 49 bps YoY & 95 bps QoQ to 12.4% vs....

New expansion announced: The board has approved setting up a greenfield automotive battery plant with a capacity of 6.5 mn units (capex Rs7 bn). Outlook and valuation: We believe Amara Raja holds durable competitive advantages over peers, with strong brand, technical expertise (via parent JCI global brand) and its lower cost structure (compared to its peers). We expect margins to improve in H2FY19 (despite weak Q1FY19 margins) on price hikes and cost improvement measures taken by the company. The company foresees opportunities in the energy storage and electric vehicles space. We recommend an ACCUMULATE...

Amara Raja Batteries Ltd (ARBL) is India's second largest Lead-acid battery manufacturer. Its segment includes automotive and industrial lead acid batteries, with market leadership in Telecom segment. Q4FY18 revenue grew by 18%YoY which was largely driven by automotive segment but industrial segment remained subdued. EBITDA margin contracted by 40bpsYoY (-230bps QoQ) due to increase in RM cost. Lead price increased by 4.7%YoY. ARBL should continue to be preferred supplier to OEM due to its excellent...

ICICI Securities Ltd | Retail Equity Research Amara Raja Batteries' (ARBL) Q4FY18 revenue was at | 1,581 crore (up 17.6% YoY) vs. our estimate of | 1,637 crore. The buoyancy in automotive sector has resulted into healthy growth momentum (4-W & 2-W segment grew 25% YoY & 30% YoY, respectively). However, the same was partly offset by industrial space that reported muted growth mainly due to telecom space, which reported de-growth The EBITDA margin contracted 39 bps YoY, 222 bps QoQ to 13.3%...