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Amara Raja Batteries (AMRJ) reported robust 2QFY2012 results, which came in
ahead of our estimates, driven by strong growth in the industrial battery segment
and stable performance in the auto replacement segment. We revise our earnings
estimates marginally upwards to factor in the company’s strong performance
during the quarter. We maintain our Buy rating on the stock.
Strong operating performance despite increased competitive activity: AMRJ posted
impressive 42.8% yoy (6.7% qoq) growth in its top line to `560cr, led by strong
growth in the industrial battery segment and stable performance by the auto
battery segment. The industrial battery segment’s growth was aided by growth in
the telecom (strong exports growth led by demand from Bharti Airtel’s African
operations) and UPS segments, where AMRJ further increased its market share.
Operating margin witnessed a 157bp yoy (strong 282bp qoq) expansion to
15.7%, led by a 351bp and 133bp yoy contraction in other expenditure and staff
costs as a percentage of sales, respectively. Raw-material cost as a percentage of
sales, however, increased by 320bp yoy mainly due to increased lead prices.
Operating and net profit registered significant 58.6% yoy (30% qoq) and 64.1%
yoy (33% qoq) growth, respectively, led by strong operating performance.
Outlook and valuation: We estimate AMRJ’s top line to witness a CAGR of ~20%
over FY2011–13E, leading to a ~17% CAGR in its net profit, largely aided by
sustained growth in the 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. AMRJ is trading at 9.2x FY2013E earnings. We maintain our Buy rating on
AMRJ with a target price of `250.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Amara Raja Batteries (AMRJ) reported robust 2QFY2012 results, which came in
ahead of our estimates, driven by strong growth in the industrial battery segment
and stable performance in the auto replacement segment. We revise our earnings
estimates marginally upwards to factor in the company’s strong performance
during the quarter. We maintain our Buy rating on the stock.
Strong operating performance despite increased competitive activity: AMRJ posted
impressive 42.8% yoy (6.7% qoq) growth in its top line to `560cr, led by strong
growth in the industrial battery segment and stable performance by the auto
battery segment. The industrial battery segment’s growth was aided by growth in
the telecom (strong exports growth led by demand from Bharti Airtel’s African
operations) and UPS segments, where AMRJ further increased its market share.
Operating margin witnessed a 157bp yoy (strong 282bp qoq) expansion to
15.7%, led by a 351bp and 133bp yoy contraction in other expenditure and staff
costs as a percentage of sales, respectively. Raw-material cost as a percentage of
sales, however, increased by 320bp yoy mainly due to increased lead prices.
Operating and net profit registered significant 58.6% yoy (30% qoq) and 64.1%
yoy (33% qoq) growth, respectively, led by strong operating performance.
Outlook and valuation: We estimate AMRJ’s top line to witness a CAGR of ~20%
over FY2011–13E, leading to a ~17% CAGR in its net profit, largely aided by
sustained growth in the 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. AMRJ is trading at 9.2x FY2013E earnings. We maintain our Buy rating on
AMRJ with a target price of `250.
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