Buy Amara Raja Batteries, expect strong Q2 numbers: Equity99

Sumit Bilgaiyan

With 26 percent equity each from the Galla Family and Johnson Controls (USA), Amara Raja Batteries (ARBL) is the technology leader and one of the largest manufacturers of lead-acid batteries for both industrial and automotive applications in the Indian storage battery industry.

ARBL supplies automotive batteries under OE relationships to Ford India, Honda, Hyundai, Mahindra & Mahindra, Maruti Suzuki, Ashok Leyland, and Tata Motors, Honda Motorcycles & Scooters India Private Ltd, Royal Enfield, Bajaj Auto Ltd among others.

Due to higher raw material prices, company had posted muted numbers for FY18 but we have seen some improvement in Q1FY19 numbers. Its sales and EBITDA grew by 18.8 percent and 14.2 percent YoY, respectively, while PAT increased by 13.2 percent to 113.03 crore. At the CMP, the stock trades at a P/E of 27.8x on TTM EPS. We are expecting strong numbers in Q2. We are recommending a buy in staggered manner for medium to long term.