Updated February 6th, 2024 at 15:51 IST
Amara Raja post strong Q3; targets 16 GWh capacity by 2032
The Tirupati-based company's margins expanded by 46 bps sequentially to 14.2%, contrasting with a slight decline seen in its competitor Exide.
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Amara Raja analysis: Amara Raja Power Systems showed robust performance in the December quarter (Q3), outperforming expectations with a 9 per cent growth in revenue and a 3 per cent increase in earnings before interest, taxes, depreciation, and amortisation (EBITDA) year-over-year, analysts said.
The Tirupati-based company's margins expanded by 46 basis points (bps) quarter-on-quarter to 14.2 per cent, contrasting with a slight decline seen in its competitor Exide.
The quarter's robust performance stemmed from notable growth observed across diverse segments. Notably, there was an impressive 11 per cent and 15 per cent year-on-year expansion in the four wheeler and two wheeler aftermarket respectively, brokerage firm Emkay said in a note.
Moreover, overall industrial battery volume saw a notable increase of 6-7 per cent, largely fuelled by heightened demand from the telecom sector. A major achievement was the doubling of revenue from lithium packs compared to the previous year, brokerage firm highlighted.
The company remains cautiously optimistic. Despite immediate triggers for the lithium business being a distance away, including financial constraints and uncertainties surrounding electric vehicle (EV) adoption rates, the company plans to proceed with its phase-1 standard operating procedure (SOP) in financial year 2026 estimate (FY26E), aiming for a 16 Gigawatt hours (GWh) capacity by 2032.
The company, during the earnings call, said that it plans to ramp up lithium pack capacity to 2 GWh and commence lithium cell production in financial year 2026 (FY26), with an estimated EBITDA margin and return on equity (RoE) of 10-11 per cent at a scale of 7-9 GWh.
Additionally, the company outlined its capital expenditure plans, including Rs 250 crore for lead-acid business and Rs 250-300 crore for lead recycling and lithium operations in financial year 2024 estimate (FY24E).
Amara Raja intends to participate in the current production-linked incentive (PLI) tender for 10 GWh and has successfully integrated the plastic component business from Mangal Industries, effective February 2024, brokerage firm said.
Despite the positive outlook, Emkay analysts remain cautious about potential risks such as global oversupply and consolidation in the EV market. Analysts retained ‘Sell’ rating on the stock with an unchanged target price (TP) of Rs 625
While Amara Raja's Q3 performance exceeded expectations and future prospects seem promising, challenges and uncertainties in the market underline the need for careful strategic planning and risk management.
The shares soared nearly 8 per cent last month while shares zoomed over 49 per cent in 2023.
Shares of Amara Raja settled 0.20 per cent lower at Rs 890.25 per share on Monday, February 5, 2024.
Published February 6th, 2024 at 08:32 IST