Amara Raja Batteries - Research Report

Amara Raja Batteries is an B /T+1 group, Computers Hardware & Equipments company with having Face value of Rs. 10. Amara Raja Batteries Limited (ARBL), the flagship company of the Amara Raja Group is one of the largest manufacturers of lead-acid batteries for both industrial and automotive applications in the Indian storage battery industry. Its Industrial and Automotive batteries are exported to 32 countries across the globe. Amara Raja is the preferred supplier to major telecom service providers, Telecom equipment manufacturers, UPS sector (OEM & Replacement), Indian Railways and to Power, Oil & Gas among other industry segments in India. Company is the Largest Exporter of 4W Batteries in India and the First AGM battery manufacturer for 2W. Amara Raja's Industrial Battery Division comprises of brands such as PowerStack®, Amaron VoltTM, Amaron SleekTM, Amaron VoltTM Amaron BruteTM and Amaron Quanta®.

Fundamentals (FY22-23):

CMP	Rs. 635
52 - week high	Rs. 670
52 – week low	Rs. 438
Dividend % (consolidated)	0.70%
ROCE	15.6 %
Book value Per Share (Rs.)	292
Revenue (Rs.)	10,137 Cr.
Debt to Equity	0.02
P/E ratio	16.5
EPS (consolidated)	Rs. 38.3
P/B ratio	2.14
Market Cap	Rs. 10,850 cr.
Face value	Rs. 1

 

Financial Results:

Company’s Net Sales was Rs 2,637.76 crore in December 2022 up 11.49%, Quarterly Net Profit at Rs. 221.88 crore in December 2022 up 52.7% and EBITDA stands at Rs. 421.12 crore in December 2022 up 38.71% as compared to December 2021. Its EPS has increased to Rs. 12.99 in December 2022 from Rs. 8.51 in December 2021.

Key Points:

1. Amara Raja Batteries and Government of Telangana signed MoU for state’s first Lithium-ion Battery Gigafactory under the name “Amara Raja E +ve” with ultimate capacity up to 16 GWh and a Battery Pack Assembly unit up to 5 GWh and it intends to invest Rs. 9,500 crores in the region over the next ten years.
2. Company has signed a land lease agreement with GMR to set up an Advanced Energy Research and Innovation Centre, called the E-Hub, at GMR Aerospace and Industrial Park, AeroCity Hyderabad. The Centre will be a one-of-a-kind institute in India that will pioneer the development of advanced clean energy technologies for mobility and energy storage.
3. It has announced a capex of ₹500 crore for setting up a lead recycling unit and a 50 MW solar power project to support sustainable development and meet a significant part of its power requirement through renewable energy sources.
4. It recently inaugurated its Advanced Lithium Technology Research Hub with a pilot plant facility for cell development based on technology sourced from Indian Space Research Organisation (ISRO).
5. Amara Raja Group and Blaze Automation have formed a joint venture to leverage the combined strengths and cumulative experience spanning over three decades to innovate, develop and manufacture IoT (Internet of Things) devices for the world market.
6. The company has a comprehensive network of 23 branches, 400+ Amaron Franchisees, 40,000+ Amaron Dealers, 1000+ Power Zone Retail stores and 2000+ Extensive Service hubs in India itself. The Company also exports its automotive batteries to 30+ nations across the globe.
7. The company has entered into an agreement with Gridtential Energy to collaborate on bipolar battery technology. It will give benefits of lead batteries with silicon-enabled, high-performance characteristics.
8. It has tied up with Schneider Electric India to manufacture and sell prefabricated substations. The package substation solution not only helps one to save on cost of land but also removes the need for coordination with different suppliers.

In last 3 years the stock gave a return of 2.31 % as compared to the rise of Sensex and Nifty in the same period.

The company incorporated a wholly-owned Subsidiary company for diversifying and setting up a Battery Recycling Plant which can be a very good earning source for the company considering the growth of battery usages across the globe. Company is currently focusing on producing Li-ion cells and battery packs that are optimized for the unique conditions found in India under its investment in Giga factory which offers it extra advantage in being preferred OEM for EV car manufacturing companies. Company is also looking to expand its overseas presence by considering Africa, the Middle East and South East Asia as their preferred markets and will soon look for various opportunities over there in lead acid batteries segment. The company has significantly decreased its debt by 10.95 Cr and maintaining healthy ROCE of 20.76% over the past 3 years. It’s almost a debt free company with a healthy Interest coverage ratio of 46.68. The company has an efficient Cash Conversion Cycle of 54.90 days and a good cash flow management. Considering all the fundamentals and its futuristic investments in EV sector and overseas expansion, the company can be added in portfolios for a long-term period.

- HET ZAVERI

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