ICICI Direct recommended hold rating on Amara Raja Batteries with a target price of Rs 700 in its research report dated February 13, 2019.
ICICI Direct's research report on Amara Raja Batteries
Amara Raja Batteries (ARBL) reported steady results for Q3FY19 Revenues came in at Rs 1,695 crore (up 9.1% YoY, down 3.3% QoQ) According to the management, the automotive segment displayed strong volumes during the quarter, especially in the aftermarket space. Industrial segment growth was steady in comparison EBITDA rose 4.6% YoY to Rs 253 crore. The EBITDA margin contracted 64 bps YoY but expanded 142 bps QoQ to 14.9%. On a YoY basis, margins were impacted due to higher raw material cost (despite average lead price down 11.7% YoY to Rs 143/kg), which can be largely attributed to an adverse product mix Consequently, reported PAT declined 2.6% YoY to Rs 131 crore Other income in Q3FY19 was at Rs 13 crore (Rs 17 crore in Q3FY18).
Outlook
Incorporating the above, we now expect sales, PAT to grow at a CAGR of 13.6% & 12.4%, respectively, in FY18-20E. We now value ARBL at Rs 700 i.e. 20x P/E on FY20E EPS of Rs 34.8 with a HOLD rating on the stock.
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