Shares of Amara Raja Energy & Mobility Ltd. fell nearly 5 percent on November 5 after the company reported weak earnings for the quarter ended September 30, 2024, missing estimates.
The company's net profit rose 6.3 percent on-year (YoY) to Rs 240.7 crore in Q2FY25 and revenue from operations increased 11.6 percent YoY to Rs 3,135.8 crore during the quarter under review. At the operating level, Amara Raja's EBITDA grew 7.5 percent YoY to Rs 440.7 crore.
The EBITDA margin stood at 14.1% in the reporting quarter compared to 14.6% in the corresponding period in the previous fiscal. EBITDA is earnings before interest, tax, depreciation, and amortization.
According to analysts at Nuvama, old-line auto and industrial batteries shall charge up Amara Raja’s core business revenue, and EBITDA CAGR to 9 percent and 10 percent respectively over FY24–27E, fair for India’s second-largest lead-acid battery manufacturer.
The company is doubling down on EVs, with lithium cell plants for NMC/ LFP chemistries slated to come on stream in FY26E/ FY28E and investments in Inobat/Log9 entities. "These efforts improve long-term growth visibility," said Nuvama as it retained a 'buy' rating of the stock with a target price of Rs 1,580.
Post tie-up with OEMs such as Piaggio and Ather Energy for lithium cell supplies, announcements of more OEM tie-ups should catalyze stock performance in the near term, the brokerage added.
Key risks for Amara Raja
1) A slowdown in domestic OEM and replacement demand led to a cut in revenue assumptions
2) Slower growth in industrial demand, leading to a cut in revenue assumptions
3) Increased competitive intensity in the lithium business leading to delays in utilization ramp-up, and margin pressures
4) A sharp surge in input costs
5) Changing battery technologies leads to fresh investments, and low IRR for existing investments
Amara Raja has announced an increase in its investment commitment to its wholly-owned subsidiary, Amara Raja Advanced Cell Technologies Private Ltd (ARACT). The board of directors has approved raising the investment limit in ARACT from Rs 1,000 crore to Rs 2,000 crore.
This capital infusion, to be delivered in one or more tranches, will be structured through loans, equity, or other financing modes.
At 11:05 am, Amara Raja shares traded nearly 4 percent lower at Rs 1,321.50 on the National Stock Exchange (NSE). The stock has surged around 60 percent this year, outperforming Nifty's returns of 10 percent.
In the past 12 months, the counter has zoomed 110 percent, doubling investors' capital. In comparison, Nifty rose 23 percent during this period.
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