Amara Raja Batteries Research Report By Maximus Securities

Amara Raja Batteries gave a strong performance in the first quarter with both industrial and replacement segments registering double digit growth. The company seems to be in line for another strong performing year aided by volume growth, increase in market share and capacity expansion. The rise in depreciation was due to capex undertaken by the company.

Amara Raja Batteries is on its path to increase its market share by becoming the preferred suppliers of OEM’s such as Honda Motorcycles and Scooters India and other 2-Wheeler OEM’s. The capacity expansion would aid it in pushing for market share in the after market as well as OEM segment. ARBL is already preferred battery supplier for tower
operators due to batteries that are capable of quick recharge and deep discharge.

With the economic recovery around the corner, the automotive segment should see an increase in demand and the expansion of bank branches and ATM installation will generate incremental battery demand for backup power.

Considering the clean balance sheet, strong financial performance during recession, scope for increasing market share and imminent recovery in the Indian economy, we value Amara Raja Batteries Ltd with a P/E of 19.5x FY16E EPS to arrive at a target price of Rs. 660/share.

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