The stock of Amara Raja Batteries jumped 10 per cent on the bourses on Monday on the back of record profit during the second quarter ended September 2019. Analysts remained bullish on the stock post Q2 results, thanks to its operating efficiency. The company has registered the highest ever quarterly profit of Rs 218.85 crore, almost doubled from Rs 120.23 crore that it had registered during the corresponding quarter in previous financial year.
The company also declared Rs 6 a share as an interim dividend. But the auto ancillary company reported a decline in revenue at Rs 1,695.31 crore (Rs 1,753.05 crore).
The stock rose Rs 65.40 or 10 per cent to Rs 719.60 on the NSE. On the derivative segment, it jumped 9.20 per cent to Rs 714.80. The discount of futures may be due to the dividend, for which the company as set November 22 as record date.
According to Motilal Oswal, which maintained its buy rating on the stock with a price target to Rs 790, volumes grew 7-8 per cent, but price pass-through of lead deflation has resulted in revenue decline of 3 per cent y-o-y to Rs 1,700 crore (v/s estimated Rs 1,800 crore). Volume growth was driven by strong growth in aftermarket, exports and UPS, but diluted by decline in OEMs and telecom, it said.
Emkay Global expects revenue/earnings CAGRs at 8 per cent/16 per cent for FY19-22. Average ROE/ROCE will likely to be strong at 17 per cent/22 per cent over FY20-22. In addition, free cash flow generation should remain healthy at an average of Rs 420 crore/year over this period, it said.
The stock currently trades at a P/E of 16x/15x on FY21/22 estimates. "We maintain our Buy rating with a revised TP of Rs 784 (up from Rs 760 earlier), based on 18x Dec’21 EPS (Sep’21 EPS earlier), Emkay Global said.