Emkay Global Financial is bullish on Amara Raja Batteries has recommended buy rating on the stock with a target price of Rs 732 in its research report dated June 01, 2020.
Emkay Global Financial's report on Amara Raja Batteries
Q4FY20 revenue grew marginally by 1% yoy to Rs15.8bn (est. Rs14.3bn), while adj. PAT grew strongly by 15% to Rs1.4bn (est. Rs1bn), above estimates due to higher-than-expected replacement revenues, operating margin and other income. Due to the impact of the lockdown and expectation of a gradual pick-up in demand, we cut our FY21 revenue estimate by 7% to Rs65.5bn, but increase FY22E revenue by 3% to Rs81.1bn. Post revision, we expect revenue/earnings CAGRs at 9%/12% for FY20-22E. Amid the overall weakness in the auto sector in FY21, a quicker recovery is expected in the battery segment, driven by an improvement in aftermarket demand stemming from the replacement of old and discharged batteries post the removal of lockdowns.
We expect AMRJ to outpace industry growth over next 1-2 years, led by market share gains. We maintain our Buy rating, with a revised TP of Rs732, up from Rs624 earlier, based on 15x FY22E EPS (unchanged). Retain EW stance in sector EAP.
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