Stay 'Neutral' On Amara Raja Maintains Motilal Oswal — Here's Why

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

Motilal Oswal Report

We met with the management team of Amara Raja Batteries Ltd. to get an update on the business. In the lead-acid business,

1. OE demand has picked up after GST rate cuts, while replacement is yet to pick up;

2. lead costs, excl. currency depreciation, remain stable QoQ;

3. the tubular battery plant can drive 300-400bp margin improvement for that segment;

4. the recycling plant can help save costs by 30-40bp;

5. power cost is likely to remain elevated for one more quarter before stabilizing.

In the New Energy business,

1. the combined investment for the first gigafactory (2GWh), the R&D plant and the customer qualification plant stands at Rs 25 billion (invested Rs 12 billion so far and will invest the balance in the next 12 months);

2. based on their progress, Amara would decide on further funding avenues for the entire project cost of about Rs 60-70 billion for 16GWh capacity;

3. this business can deliver 10-11% Ebitda margin at a scale of about 10 GWhr;

4. apart from Ather Energy, which has partnered with Amara for its cell requirements, Amara is currently working on few other RFQs.

While the market is optimistic about Amara’s li-ion initiative, we are cautious about its potential returns. We maintain a Neutral rating with a target price of Rs 1,030, based on 18x Jun’27E EPS.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.