Accumulate Amara Raja Batteries; target Rs 250: P Lilladher

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Accumulate Amara Raja Batteries; target Rs 250: P Lilladher

Prabhudas Lilladher is bullish on Amara Raja Batteries has recommended accumulate rating on the stock with a target of Rs 250 in its November 15, 2011 research report.

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Prabhudas Lilladher is bullish on Amara Raja Batteries has recommended accumulate rating on the stock with a target of Rs 250 in its November 15, 2011 research report.

"Amara Raja Batteries (AMRJ) reported 42.8% YoY growth in its top-line at Rs5.6bn in Q2FY12 (PLe: Rs5.0bn), mainly led by strong sales in the Industrial segment, both in the UPS as well as the Telecom verticals. On a sequential basis, top-line improved by 6.5%, primarily due to a strong traction in the industrial side of the business. Average price of lead, during the quarter, stood at ~US$2,450/tonne as compared to US$2,800/tonne in Q1FY12. On account of robust top-line and richer product mix, EBITDA improved by 55.1% to Rs882m, with EBITDA margins improving by 120bps YoY to 15.7%. As a result, PAT grew by a whopping 64.1% YoY to Rs519m (PLe: Rs378m)."

"Industrial segment registered a volume growth of 15%+ amidst very competitive market conditions. AMRJ has increased its market share in the both the segments of Telecom and UPS. The telecom segment volumes in the export market witnessed significant growth during H1FY12, mainly led by a surge in demand in African markets, enabled by its relationship with Bharti Airtel. Telecom side (~30% of the top-line) of the business seems to have bottomed out and the management is confident of continuing its growth in the industrial segment despite challenges on the pricing front."

"AMRJ has maintained a strong balance sheet, with the return ratios in excess of 24% for the past few years. We expect revenues to grow at a CAGR of 15.5% and net profit to grow at a CAGR of 20.2% for FY11-FY13E period. At the CMP, the stock is trading at 9.9x and 8.5x its FY12E and FY13E earnings estimate, respectively, which in our view is attractive. We maintain our 'Accumulate' rating on the stock," says Prabhudas Lilladher research report.

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