Gaurav Bora ( Market Expert)
Amara Raja Battery
TGT 1,000 (1 Year)
All vehicles are parked from last 2 months; batteries will die due to this. Once Lockdown get closed, huge demand will be triggered as it is non-repairable thing. Indian Auto Sector was struggling due to multiple macroeconomic challenges and now with Covid 19 has brought the sector to a halt. Battery manufacturing segment will come out of this trouble sooner if you compare it with other segments as replacement demand will be continue to do well. Battery segment will be benefited with this Covid 19 lock down.
Key Points :
• Significant correction in stock price of over 30% from 52 week high.
• Amara Raja Battery is almost 0 Debt Company.
• Better than close peer Exide Industries, Exide is stuck in non-core business like life insurance.
• Electric Vehicle (EV) will be upcoming biggest opportunity for company. Company is spending much on innovation for manufacturing batteries for EV, Amara Raja is also using tubular flooded batteries for e-rickshaws.
• Amara Raja setting up 100 Megawatt hour lithium-ion battery plant in AP which is big step towards catering EVs.
• Amara Raja generates significant revenues from replacement segment, generates around 45% of total revenue from replacement.
• GST has positive impact on organised battery manufacturers; Amara Raja is among market leader.
• Main raw material Lead prices at four year low provides hike in profit margins.
• Amara Raja is currently trading at 15.5x FY 22 projected earnings, which is very reasonable.
Investors must accumulate Amara Raja Battery among uncertain environment of Covid-19.