Amara Raja Batteries Q3 Results Review - Strong Margin Performance: Dolat Capital

Dolat Capital Report

Amara Raja Batteries Ltd. reported strong numbers in Q3 FY23, net revenue was at Rs 26.37 billion (up 11.5% YoY) while Ebitda stood at Rs 3.96 billion with margin at 15% (up 170 bps QoQ) benefited from fall in lead, separator prices and plastic cost, partially offset by rupee depreciation.

The company would be a key beneficiary of strong growth in the passenger vehicles segment. Four wheelers contributes ~55% of total revenue (25% from original equipment manufacturers and rest 75% in aftermarket and export).

Amara Raja has come up with a new product with 72 months’ warranty based on stamped grid technology in the pro segment which will help to increase customer faith in the product and gain market share.

We maintain our positive view on Amara Raja due to:

1. increase in production capacity which will help gain market share in the OEM segment (new business orders in two-wheeler from TVS Motor Company Ltd. and Hero MotoCorp Ltd.);

2. sharp recovery in replacement and OEMs demand

3. diversification through foray into cell manufacturing and

4. correction in raw material prices help in margin recovery.

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