ICICI Direct has given Reduce recommendation for Amara Raja Batteries with a target price of Rs. 800 in its research report issued on Feb 26, 2021

ICICI Direct’s research report on Amara Raja Batteries

Amara Raja Batteries (ARBL) reported steady Q3FY21 results. Net sales were up 12.1% YoY to Rs 1,960 crore. According to management commentary, growth was achieved on the back of broad-based strength across automotive channels, telecom & commercial UPS segments. Margins were at 15.6% (down 195 bps QoQ) amid 82 bps gross margin contraction and increase in other expenses on a percentage of sales basis. PAT grew 17.5% YoY to Rs 193 crore, partly aided by higher other income (Rs 35 crore vs. Rs 13 crore in Q3FY20). ARBL declared interim dividend of Rs 5/share for FY21E and announced Rs 500 crore capex towards – (1) Rs 220 crore for 50 MW solar power plant and (2) Rs 280 crore for greenfield lead recycling unit.


While topline, margin performance is set to be broadly positive, impending EV threat for lead acid business is a reality – and could limit valuation multiples commanded by ARBL. We maintain REDUCE recommendation, valuing ARBL at Rs 800 i.e., 17x FY23E EPS (earlier target price Rs 715).