Emkay Global Financial's report on Amara Raja Batteries
Q1FY21 revenue stood at Rs11.5bn, down 37% yoy but better than the estimated 56% fall. Revenue was aided by flat growth in the telecom segment and pickup in auto replacement demand in May-Jun’20. EBITDA margin at 13.2% beat our estimate of 11.3%, led by better-than-expected revenue and cost reduction efforts. AMRJ was able to retain the benefits of low lead prices with no pass-through in the replacement market. Amid weakness in the auto sector in FY21E, a swift recovery is expected in the battery segment, led by a pickup in replacement demand. Volumes should improve gradually in Industrial/OEM segments ahead. Also, we expect market share gains to continue for AMRJ.
Outlook
We expect a 10%/15% CAGR in revenue/earnings over FY20-23E, with average ROCE of 24% and FCF of Rs5bn/year. We retain Buy with a TP of Rs803 (Rs732 earlier), based on 15x Sep’22E EPS (Mar’22E EPS earlier). We maintain EW stance in sector EAP.
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