Geojit's research report on Amara Raja Batteries
During Q3FY21, ARBL revenue came at 12%YoY led by sustained demand recovery both in OEM and replacement sales. EBITDA margin came lower at 15.6% (-60bps) due to higher lead price. However, continued cost control initiative offset further decline. Investment of Rs350cr for technological & capacity up-gradation in the lithium ion pilot project and 2W/4W batteries is progressing as per schedule, and will drive volume growth in medium to long term. Setting up 50MW solar power plant in Andra Pradesh for an outlay of Rs220cr and setting up a Greenfield lead recycling unit with capacity of 1lac ton, for an outlay of Rs280cr to be spend over 18months. Given the strong aftermarket reach and brand visibility ARBL to gain market share from the unorganized sector. The aftermarket segment accounts for 40% of the automotive sales & rest from the OEM.
We believe the auto sector is likely to show meaningful pick up in near term owing to lower base and new launches. We value ARBL at 20x FY23EPS and recommend Buy rating at CMP.
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