Buy Amara Raja Energy and Mobility; target of Rs 1160: Geojit Financial Services

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26 Aug, 2025 12:21

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Amara Raja Energy & Mobility Ltd. (ARE&M), the flagship company of the Amara Raja Group, is one of the largest manufactures of lead-acid batteries. Its segments comprise 70% automotive & the remaining industrial, with market dominance in the telecom segment. We expect the demand for lead-acid business to continue for near term due to change in OEM uptick in lithium ion batteries. The lead-acid business contributes 96% of total revenue, registering a growth of 9% YoY. ARE&M, Q3FY25 revenue grew by 7.5%YoY on the back of volume growth in the aftermarket & OEM segments. Industrial battery volume saw a moderate growth driven by muted recovery in telecon and UPS segments. EBITDA margin contracted by 195bps, largely due to higher operating costs in sourcing metals and power from a revision by the Andhra Pradesh govt. The company expects to mitigate the power cost through increased renewable energy usage in the future. Investment for technological upgrades in the lithium ion project for 2W/3W batteries is progressing as per schedule, and have initiated supplying lithium battery packs for 3W applications.

We value ARE&M on SOTP with 16x EPS (Standalone) at Rs.1,029/ share, new mobility & energy investments at Rs.131 per share, with a target price of Rs. 1,160/share and reiterate our Buy rating at CMP.

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