Amara Raja Batteries - Q4FY13 Result Review - Angel Broking

Amara Raja Batteries (AMRJ) registered weak results for 4QFY2013 on account of contraction in operating margins (down 209bp qoq) primarily due to raw-material cost pressures. Additionally, provisioning of Rs. 8cr towards impairment in asset value and an additional depreciation charge of Rs. 5cr due to revision in estimated useful life of certain assets also impacted the bottom-line. Top-line posted a robust growth of 19.4% yoy (5.7% qoq) to Rs. 804cr, broadly in-line with our estimates, led by strong volume growth in the four-wheeler and two-wheeler battery segments. The industrial battery segment too registered a strong revenue growth mainly driven by the replacement demand in the telecom battery segment. On the operating front, margins deteriorated by 209bp on a sequential basis and stood at 13.9% as against our expectations of 14.5%, largely due to a 272bp qoq increase in raw-material expenditure as a percentage of sales. Led by weak operating performance, an impairment charge of Rs. 8cr and an additional depreciation expense of Rs. 5cr, net profit declined 26.6% qoq to Rs. 59cr, which was lower than our estimates of Rs. 76cr. At Rs. 265 the stock is trading at 13x FY2015 earnings.

We recommend an Accumulate rating on the stock with a target price of Rs. 285.

Source : Equity Bulls

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