- Amara Raja's Q1 FY27 margin miss did not lead to bearish brokerages outlook
- JPMorgan and Nomura kept Neutral ratings and raised target prices for the stock
- Margin pressure due to higher expenses and costs expected to normalize gradually
Amara Raja Energy & Mobility's Q1 FY27 margin miss has not prompted brokerages to turn bearish on the stock. JPMorgan and Nomura retained Neutral ratings but raised their target prices, with both pointing to a recovery in the core lead-acid business and the execution of Amara Raja's new energy plans as key factors for the stock's next phase.
JPMorgan raised its target price to Rs 1,070 from Rs 985, saying the margin pressure in the June quarter was driven by higher brand promotion expenses, increased warranty provisioning, manufacturing upgrade expenses and elevated freight and fuel costs. Some of these costs could persist in the near term before gradually normalising.
The brokerage believes Q1 margins likely marked the bottom, which provides the basis for its higher target despite the earnings miss.
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JPMorgan also highlighted Amara Raja's commentary on battery energy storage systems as a positive for investors. The company is set to start operations at its 5 GWh facility in Q3 FY27, with its current priority focused on energy storage system cells rather than standard EV cells.
Nomura raised its target price to Rs 1,048 from Rs 942, while retaining Neutral. It expects margins in the lead-acid business to improve, but said margins in the new business will be an important monitorable. The brokerage identified the success of Amara Raja's new energy business as a key factor for any re-rating of the stock.
Nomura continues to prefer Sona BLW and Uno Minda within the auto-parts space.
Amara Raja's standalone revenue rose 20.6% YoY to Rs 4,041 crore in Q1, while EBITDA increased 5.4% to Rs 407 crore. EBITDA margin fell to 10.1% from 11.5%. Net profit rose 4.6% to Rs 203 crore.
The new energy business contributed Rs 209 crore to consolidated revenue, while lead-acid batteries and allied products contributed Rs 4,005 crore.
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