Amara Raja Energy & Mobility Ltd. share price target

Q1FY18 EBITDA missed estimates by 9% on gross margin erosion despite strong sales growth. EBITDA margin at 12.9% (down 450 bps YoY/84 bps QoQ) was at a 4-year low and missed estimates by 200 bps.

ICICI Securities Ltd | Retail Equity Research Amara Raja Batteries' (ARBL) revenues came in at | 1,497 crore (up 13.4% YoY) vs. our expectation of | 1,557 crore. According to the management, automotive battery business continued to maintain the growth trend but industrial battery business (mainly disruption in the telecom sector) has been subdued thereby resulting in lower volume...

Revenue increased by 11.38% to Rs. 1497.45 Cr in Q1FY18 when compared to the previous quarter. Revenue increased by 11.38% to Rs. 1497.45 Cr in Q1FY18 when compared to the previous quarter.

Estimates lowered to reflect weak Q1FY18 profitability: We cut our EBITDA margin estimates by 100 bps for FY18 (reflecting weak Q1FY18 margins) and by 50bps in FY19. Our net profit estimates for FY18/19 stand lower by 7.7%/3.4%, respectively. Outlook and Valuation: We believe Amara holds durable competitive advantages over peers, with strong brand, technical expertise (via parent JCI global brand) and its lower cost structure. Amara remains well positioned to continue outperforming its peers in an industry that enjoys rare advantages in the Automotive space. We expect margins to improve from Q2FY18 on price hikes taken by the company. We...

Revenue in line Higher lead price is a concern 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. Q1FY18 revenue grew by 14%YoY which was largely driven by automotive segment (~60% of the revenue) but industrial segment remained subdued. EBITDA margin declined by 450bpsYoY due to increase in lead price, but is being addressed by price hikes and effective cost strategies....

Valuation: We believe, the company is well positioned with the expanded capacity for 2W & 4W, and newly established tubular battery plant which will aid in fulfilling the demand from inverter, e-rickshaw and solar market segments. This would help ARBL to gain market share across all segments. We expect revenue/earnings to grow at a CAGR of ~35%/51% over FY17p19e. The stock trades at 26.1x/20.4x of FY18e/FY19e. We maintain our BUY rating with a price target of 1,055. (25x on FY19e EPS, 22% upside)....

Background: Amara Raja Batteries Ltd (ARBL), a Joint Venture between Amara Raja Group & Johnson Controls, each holding 26% stake, is the second largest battery manufacturer in India. It is the largest manufacturer of standby valve regulated lead acid (VRLA) batteries in the Indian Ocean Rim region an d manufactures automotive batteries for all vehicle segments. With a production capacity of 18mn units (Automotive: 19 mn & Industrial(MVRLA)- 3.6 mn), ARBL has built a strong pan-India distribution network of 30,000 retailers and 274 franchisees (Amaron network) & 900 retailers (Powerzone network).ARBL's market...

Revenue grew by 1.24% to Rs. 1344.46 Cr in Q4FY17 when compared to the previous quarter.

Amara Raja Batteries' (ARBL) revenues came in at | 1,344 crore (up 17.4% YoY) above our expectations of | 1,293 crore. Growth was largely driven by the automotive segment, which accounts for ~60% of overall revenue. The industrial battery (accounts for 40% of revenue) space for ARBL remained subdued as telecom & tower companies are reworking the cost structure, post the entry of Jio, thereby impacting volume offtake for replacement batteries EBITDA margins contracted 309 bps YoY & 163 bps QoQ to 13.7%...

Management Outlook: As per management, 2W demand was partially affected by demonetization during 2HFY17. Nevertheless, the company foresees sustained demand for passenger cars and 2W going forward. The recent entry of JIO in the telecom markets has disrupted revenue models of telecom companies which in-turn affected volumes for...