Comments
Emkay Global
Amara Raja Batteries (Buy)
CMP: ₹785.85
Target: ₹856
Despite the steep fall in OEM (original equipment manufacturer) revenues and lower realisations, Amara Raja Batteries’ Q3FY20 revenues grew marginally by 3 per cent yoy to ₹1,750 crore (estimated: ₹1,730 crore) on positive growth in the Replacement and Industrial segments.
EBITDA margin expanded 130 bps y-o-y to 16.2 per cent (estimated: 14.9 per cent) due to lower-than-expected raw material costs. Benign mix in automotive/two-wheeler as well as industrial segments, better sourcing, and the use of low-cost inventories supported margins during the quarter.
We increase FY21/22E EPS forecast by 6 per cent/7 per cent to ₹42.7/₹47.6, led by higher volume and margin assumptions. Post revision, we expect revenue/earnings CAG₹ at 9 per cent/19 per cent for FY19-22E, with an average ROCE of 23 per cent and FCF of ₹400 crore.
The stock currently trades at a P/E of 17x/16x on FY21/22 estimates. We maintain our ‘Buy’ rating with a revised target price of ₹856, up from ₹784 earlier, based on 18x FY22E EPS (December 21E EPS earlier).
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.