Mid-Cap Auto- Ancillary Stock Gets Buy Call For A Target Price Of Rs 700 In 12 Months: Chola Wealth

Renowned brokerage house Chola Wealth has assigned buy rating to the auto-ancillary mid cap stock Amara Raja Batteries Ltd for a target price of Rs 700 apiece. Amara Raja Batteries Ltd is the technology leader and one of the largest manufacturers of lead acid batteries for both industrial and automotive applications in the Indian storage battery industry.

Amara Raja Batteries Ltd Stock Outlook

The current market price of the stock is Rs 518 apiece with a gain of 1.36% in trading today so far (11:46 am). The brokerage firm has recommended investors to buy the stock at its current market price as it has the potential to surge to Rs 700 apiece in 12 months period. It has the potential to fetch 35% return.

Amara Raja Batteries Ltd 52-week high/low

The stock's 52-week high is Rs 781 apiece and 52-week low is Rs 438 apiece.

Amara Raja Batteries Ltd Market Capitalization

The stock has a market capitalization of Rs 8,856.63 crore.

Amara Raja Batteries Ltd Registers Strong Topline Performance

Amara Raja Batteries (AMRJ) posted a strong topline performance with revenue increasing 38.9%YoY/20.1% QoQ to ₹26.2bn led by strong volume growth across the verticals. The robust demand in the automotive sector from the aftermarket along with 2/4-Wheeler OEM segments boosted the volumes.

Amara Raja Batteries Ltd EBITDA

The EBITDA stood at ₹2.6bn (+4.3% YoY/+18.77% QoQ) while PAT came at ₹1.3bn (+5.9%YoY/+33.4%QoQ). The EBITDA margins lowered to 10.0% (-330bps YoY/-10bps QoQ). The high RM costs continued to impact the margins despite the growth in revenue.

Amara Raja Batteries Ltd To Enter Cell Manufacturing

The company is planning to enter cell manufacturing through a customer qualification plant. With regards to capex, the company will be investing in the Li-ion cell technology and the investment is expected to be in the range of ₹5-5.5bn.

Amara Raja Batteries Ltd Valuation

According to Chola Wealth, "Amara Raja Batteries has over the years built a strong franchise for itself in lead acid batteries market with extensive growth in aftermarket business. In recent past, the industry specific headwinds and issues at company level have weighed on the financial performance. With revival in automotive demand the company is expected to report improved performance hereon. At CMP, the stock trades below its historical average at 13.7x FY23E&11.6xFY24E. The strong guidance, reviving product demand & inherent growth structure of the company validates the BUY rating on the stock with a target price of ₹700."

About Amara Raja Batteries Ltd

In India, Amara Raja is the preferred supplier to major telecom service providers, Telecom equipment manufacturers, the UPS sector (OEM & Replacement), Indian Railways and to the Power, Oil & Gas, among other industry segments. Amara Raja's industrial battery brands comprise PowerStack®, AmaronVolt® and Quanta®.

The Company is a leading manufacturer of automotive batteries under the brands Amaron® and Powerzone^TM, which are distributed through a large Pan-India sales & service retail network.

Disclaimer

The stock has been picked from the brokerage report of Chola Wealth Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.