Buy Amara Raja Batteries; target Rs 250: Angel Broking

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Buy Amara Raja Batteries; target Rs 250: Angel Broking

Angel Broking is bullish on Amara Raja Batteries (AMRJ) and has recommended buy rating on the stock with a target price of Rs 250 in its November 18, 2011 research report.

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Angel Broking is bullish on Amara Raja Batteries (AMRJ) and has recommended buy rating on the stock with a target price of Rs 250 in its November 18, 2011 research report.

"Amara Raja Batteries (AMRJ) reported robust 2QFY2012 results, which came in ahead of our estimates, driven by strong growth in the industrial battery segment and stable performance in the auto replacement segment. We revise our earnings estimates marginally upwards to factor in the company's strong performance during the quarter."

"Strong operating performance despite increased competitive activity: AMRJ posted impressive 42.8% yoy (6.7% qoq) growth in its top line to Rs 560cr, led by strong growth in the industrial battery segment and stable performance by the auto battery segment. The industrial battery segment's growth was aided by growth in the telecom (strong exports growth led by demand from Bharti Airtel's African operations) and UPS segments, where AMRJ further increased its market share. Operating margin witnessed a 157bp yoy (strong 282bp qoq) expansion to 15.7%, led by a 351bp and 133bp yoy contraction in other expenditure and staff costs as a percentage of sales, respectively. Raw-material cost as a percentage of sales, however, increased by 320bp yoy mainly due to increased lead prices. Operating and net profit registered significant 58.6% yoy (30% qoq) and 64.1% yoy (33% qoq) growth, respectively, led by strong operating performance."

"We estimate AMRJ's top line to witness a CAGR of ~20% over FY2011-13E, leading to a ~17% CAGR in its net profit, largely aided by sustained growth in the auto and industrial battery volumes. We believe AMRJ is well placed to tap the rising demand from the auto and industrial segments, with its innovative products, competitive pricing, increased capacity and widening reach. AMRJ is trading at 9.2x FY2013E earnings. We maintain our Buy rating on AMRJ with a target price of Rs 250," says Angel Broking research report.

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To read the full report click on the attachment