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Research
Amara Raja Batteries - 1QFY2013 Result Update - Angel Broking
Posted On : 2012-08-22 20:34:45( TIMEZONE : IST )
Amara Raja Batteries (AMRJ) reported extremely strong results for 1QFY2013 supported by robust volume growth of 55%, 22% and 15% in the two-wheeler, four-wheeler and industrial battery segments respectively. Going ahead, we expect AMRJ to continue its growth momentum led by widening reach and strong product portfolio. Due to better-than-expected 1QFY2013 performance, we revise our earnings estimates upwards for FY2013E/14E by 8.7%/9.6%. Post the strong results, the AMRJ stock has jumped 20% over the last two days. Due to limited upside from the current levels we maintain our Accumulate rating on the stock.
Impressive set of results for 1QFY2013: AMRJ registered an impressive 32.2% yoy (3.2% qoq) growth in its top-line to Rs.694cr. The growth was led by better-than-expected volume growth of 55%, 22% and 15% in the two-wheeler, four-wheeler and industrial battery segments respectively. The EBITDA margin witnessed a 431bp yoy (303bp qoq) expansion to 17.2% led by a superior product-mix and a 362bp yoy (flat qoq) decline in raw-material expenses.
Raw-material expenses declined on account of 22.5% yoy (5.6% qoq) decline in lead prices. However, the benefits accruing from decline in lead prices were restricted due to INR depreciation. Led by a strong operating performance and significant increase in other income (Rs.6cr vs Rs.1cr in 1QFY2012), the net profit registered a robust growth of 95.1% yoy (30.5% qoq) to Rs.76cr.
Outlook and valuation: We estimate AMRJ's top-line to witness a strong CAGR of ~17% over FY2012-14E, leading to a ~20% CAGR in its net profit, aided by sustained growth in auto and industrial battery volumes. We believe AMRJ is well placed to tap the rising demand from the auto and industrial segments, with its innovative products, competitive pricing, increased capacity and widening reach. At Rs.382, AMRJ is trading at 10.5x FY2014E earnings. Due to limited upside from current levels, we maintain our Accumulate rating on AMRJ with a target price of Rs.402, valuing the stock at 11x FY2014E EPS.
