Healthy Q1; augmenting focus on EVs
Q1FY25 revenue/EBITDA grew 13%/22% YoY to INR31.3bn/INR4.3bn, largely in line with estimate. We are reducing FY25–27E EPS by 5–6% factoring in lower industrial segment growth and higher interest expenses. We are building in core (lead acid battery) revenue/EBITDA CAGR of 8%/11% over FY24–27E led by growth in auto and industrial.
Amara Raja is doubling down on EVs, with lithium cell plants for NMC/ LFP chemistries slated to come on stream in FY26E/28E and investments in Inobat/Log9 entities. These efforts enhance long-term growth visibility. Retain ‘BUY’ with a TP of INR1,980 (INR2,040 earlier), based on 15x Sep-26E EPS for the core business, 3x PB for lithium battery investments and INR23/share for Inobat/Log9 investments.
Q1FY25 EBITDA in-line
Revenue grew by 13% YoY to INR31.3bn (estimate: INR30.7bn), broadly in line with estimate. In 4W, OEM volume grew ~6% YoY, replacement increased ~11% YoY and exports surged ~45% YoY. In 2W, OEM volume rose ~25% YoY and replacement ~18% YoY. In Industrial, volume slid ~5% YoY led by a fall of ~20% in the Telecom segment due to a high base. EBITDA grew 22% YoY to INR4.3bn (estimate: INR4.3bn), broadly in line with estimate. EBITDA margin expanded 100bp YoY to 13.7% (in comparison, larger peer Exide posted an EBITDA margin of 11.5%). All in all, EPS increased 19% YoY to INR13.4 (estimate: INR13.6), broadly in line with estimate.
Stable growth likely in core business (lead acid batteries)
We are building in an 8% revenue CAGR for the core lead acid batteries business over FY24–27E on the back of growth in the auto and industrial segments. We forecast auto revenue CAGR would be 9% driven by growth in underlying OEM industry and stable replacement demand. The industrial segment’s revenue CAGR shall be 7%— likely driven by categories such as UPS, traction and solar/power segments.
Augmenting focus on EVs
Amara Raja has started assembling lithium battery packs and manufacturing chargers. It is supplying battery packs to customers in the 2W, 3W and industrial segments (Piaggio, Mahindra, Omega SEKI, Indus Towers, BSNL, etc). The company is working on a small lithium-ion cell manufacturing facility with 2GWH capacity with NMC chemistry, which is likely to come on stream in FY26. In addition, it is working on 4–5GWH capacity with LFP chemistry, which is likely to come on stream in FY28. The ten-year plan is to expand capacity to 16GWH at an investment of INR95bn. Furthermore, to enhance focus on the new energy business, it has invested in startups such as Log9 and Inobat.
Leave a Reply