Nov 15, 2012, 01.05 PM | Source: Moneycontrol.com
Angel Broking is bullish on Amara Raja Batteries and has recommended accumulate rating on the stock with a target of Rs 270 in its November 09, 2012 research report.
, Angel Broking |
“Amara Raja Batteries (AMRJ) registered impressive results for 2QFY2013 driven by double-digit growth in the automotive replacement and UPS batteries segments. We expect the company to sustain its growth momentum going ahead, led by widening reach, strong product offerings and increasing capacity. We revise our revenue and earnings estimates upwards to factor in the strong operating performance during the quarter. Nonetheless, due to limited upside from the current levels we recommend an Accumulate rating on the stock.”
“AMRJ posted an impressive growth of 27.9% yoy (3.6% qoq) in its top-line to Rs719cr led by strong double digit volume growth in the automotive replacement battery segment. Further, sustained momentum in the tubular and home UPS segment also aided the top-line growth. However, the automotive OEM and industrial battery businesses reported a marginal growth led by sluggish demand environment. The EBITDA margin witnessed a 73bp yoy expansion to 16.4% largely due to superior product-mix. During the quarter, the raw-material expense as a percentage of sales declined 121bp yoy mainly due to a decline in lead prices. However, on a qoq basis, margins contracted 81bp due to 19.9% increase in other expenditure on account of escalating conversion and distribution costs owing to power shortage. Led by a strong operating performance and significant increase in other income, the adjusted net profit registered a 53.2% yoy (4.4% qoq) growth to Rs79cr.”
“Due to the strong performance over the last six quarters, AMRJ has narrowed the valuation gap over the market leader, Exide from 30-35% to ~20% currently. We estimate AMRJ’s top-line to witness a strong CAGR of ~18% over FY201214E, leading to a ~26% CAGR in its net profit, aided by sustained growth in the automotive and industrial battery volumes. At Rs258, AMRJ is trading at 13x FY2014E earnings. We recommend an Accumulate rating on the stock with a target price of Rs270, valuing the stock at 13.6x (15% discount to Exide’s multiple of 16x) FY2014E EPS,” says Angel Broking research report.
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