Buy Amara Raja Batteries; target of Rs 762: Geojit

Geojit's research report on Amara Raja Batteries

Amara Raja Batteries Ltd. (ARBL) is India’s second largest Lead-acid battery manufacturer. Its segments comprise 70% automotive & the remaining industrial, with market dominance in the telecom segment. We expect growth in the auto sector, superior product mix and higher RM pass through to OEMs will support the margin expansion. Investment for technological up-gradation in the lithium ion project for 2W/3W batteries is progressing as per schedule and have started supplying lithium battery packs for 3W applications. ARBL, Q4FY23 revenue grew by 11%YoY on the back of volume growth in the aftermarket & OEM segments. Overall, 4W & 2W volume grew by 7% and 20%, respectively. Revenue for the full year grew by 19%YoY. EBITDA margin expanded by +380bps, owing to higher RM pass though to customers and internal efficiencies. The company’s strategy is to incorporate lithium ion projects and expansion as a wholly owned subsidiary, to support long term visibility. We value ARBL at 13x FY25E EPS and recommend Buy rating.

Outlook

However, on a 1 year fwd. basis, the stock is trading below its historical average and has shown good attraction in the last month. We value ARBL at 13x FY25E EPS with a target price of Rs. 762/share and recommend Buy rating at CMP.

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