Amara Raja Jumps The Most In Over Two-And-A-Half Years On Q2 Beat

Shares of Amara Raja Batteries Ltd. jumped the most in more than two-and-a-half years after its second-quarter profit beat analysts' estimates.

The Tirupati, Andhra Pradesh-based battery maker's net profit rose 40% from a year-ago period to Rs 201.2 crore in the July-September quarter. That compares with the Rs 111.3-crore consensus estimates of analysts tracked by Bloomberg.

Key Highlights (Consolidated, YoY)

• Revenue increased 19% to Rs 2,700.47 crore.

• Ebitda rose 33% to Rs 358.71 crore.

• Ebitda margin at 13.3% Vs 11.9%

• Dividend of Rs 2.90 per share of face value Re 1.

"It witnessed robust demand in the automotive sector from the aftermarket as well as OEM segments. Exports showed very healthy growth in Middle East and South East Asian markets. Industrial battery volumes continued their upswing, especially in the telecom segment driven by 5G rollout preparations in India," the company said.

Harshavardhana Gourineni, executive director – automotive and industrial business at the company, said they have "rebounded from the cost pressures of the previous quarters". "We have grown the business across verticals. We are optimistic that the economic drivers will remain stable in the near future.”

The earnings beat sent the stock soaring as much as 11.5%, the most since March 26, 2020, to Rs 579.9 apiece. The stock was the best performer on the S&P BSE 500, Nifty Smallcap 100 and NSE Nifty 500 indices.

The stock closed at Rs 569.4, up 9.5%.

Trading volume was 11 times the three-month full-day average, as it extended gains to the second day.

Here's what brokerages made of the company's Q2:

Motilal Oswal

• Maintains 'neutral' rating with a target price of Rs 590, implying a potential upside of 14%.

• Earnings were led by softening of raw material costs coupled with volume growth across segments. The recent moderation in lead prices will aid margin recovery. Volumes should see an upward trajectory in both automotive and industrial segments.

• The expectation of better earnings growth balances out the increasing threat of lithium chemistry to the auto and industrial businesses.

Emkay 

• Maintains 'hold' rating with a target price of Rs 550, implying a potential upside of 5.8%.

• Factoring-in better revenue and margin assumptions, we increase our FY23- 25E EPS by 2-8%.

• Despite losing out in the PLI-ACC scheme, Amara Raja plans to commence construction work on lithium-ion cell manufacturing facility and production may commence after two years.

• However, as we do not see any near-term triggers, we retain 'hold'.

• Key downside risks: Lower-than-expected demand in key geographies, increased competitive intensity, and adverse movement in commodity prices/currency rates.