Amara Raja Energy & Mobility Ltd. share price target

3 February 2020 AMRJs performance was expectedly strong with ~26% YoY PAT growth. More importantly, its volume growth in aftermarket continues to endorse our view of value migration from the unorganized to organized segment. We marginally upgrade our EPS estimate and maintain price of ~INR885 (~20x Mar22E consol EPS). Revenue/EBITDA/PAT grew 3%/12%/26% YoY to INR17.5b/INR2.8b/INR1.6b in 3QFY20. For 9MFY20, revenue/EBITDA/PAT increased ~1%/20%/44% YoY. Revenues were driven by strong volume growth in the auto aftermarket business. However, weakness in the OEM (15-16% decline) and Telecom (13-14% decline) businesses, along with the impact of lower lead prices (2.5-3% YoY decline), resulted in moderate revenue growth. Gross margin of 35.5% (+270bp YoY, -40bp QoQ) exceeded our estimate due to inventory changes and a better mix. However, EBITDA margin expanded at a lower rate of 130bp YoY (-100bp diluted the benefit of gross margin improvement. EBITDA increased ~12% YoY (-3% QoQ) to ~INR2.

Sector: Auto Parts & Equipment /Mid-Cap | Earnings Update 2QFY20 Background: Amara Raja Batteries Ltd (ARBL) is the second largest automotive battery manufacturer and the largest supplier of industrial storage batteries in India. 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 is de-risked as it caters to automotive as well as industrial segments. Sales are well diversified...

Margin expanded owing to lower lead price 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 Q2FY20, ARBL revenue de-grew by -3.3%YoY, (marginally below our estimate) due to lower auto sales from manufacture's . However EBITDA margin expanded by 370bps to 17.2% on account of sharp decline in Lead price (-3.3%YoY) and better product mix....

9 November 2019 of lead deflation has resulted in revenue decline of 3% YoY to INR17b (v/s est. Volume growth was driven by strong growth in aftermarket, exports and UPS, but diluted by decline in OEMs and telecom. Auto volumes grew 7-8% while Industry volumes grew 6- 7%. Average spot lead prices in 1QFY20 (since impact with 3 months lag) were lower by ~8.5% QoQ and ~18% YoY, which hurt revenue growth. Gross margins improved 500bp YoY (+350bp QoQ) due to lower lead prices and better mix (lower OEM contribution). However, operating deleverage diluted EBITDA margin expansion to ~350bp YoY (+190bp QoQ) at 17.2% (v/s est. This coupled with lower tax boosted adj. PAT growth to ~80% YoY to INR2.2b (v/s est.

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....