Buy Amara Raja; target of Rs 590: ICICIdirect

“ARBL’s performance has continued to be impressive even as the industry leader struggles with consistency of profitability. The company’s consistent performance, strong return ratios, good visibility of earnings and a strong balance sheet make a strong case for valuation premium of ~20-25% vis-à-vis EIL. We expect a CAGR of ~25% in FY14-16E and believe ARBL remains a low-risk recovery play to domestic automotive recovery. The stock is available at ~15.5x FY16E earnings, which we feel is lower than other peers in the auto ancillary space. We value ARBL at 17.5x FY16E EPS, to arrive at a target price of Rs 590. We maintain our BUY rating on the stock with an upside potential of 13%,” says ICICIdirect.com research report.

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