Amara Raja Batteries (Q3 FY14)

India Infoline News Service | Mumbai |

Amara Raja Batteries Ltd (ARBL) reported a topline growth of 13.4% yoy and 6.9% qoq to Rs8,629mn. This was lower than our expectations.

CMP Rs338, Target Rs375, Upside 10.9%

  • Amara Raja Batteries Ltd (ARBL) reported a topline growth of 13.4% yoy and 6.9% qoq to Rs8,629mn. This was lower than our expectations.


  • The automotive segment reported a double digit revenue growth on back of strong volume growth in two wheeler batteries and marginal volume growth in four-wheeler batteries. While OEM demand continued to be sluggish, an early sign of demand slowdown in four-wheeler replacement was visible in Q3 FY14.


  • The industrial battery business reported flat volume growth on yoy basis due to capacity constraints and subdued demand for UPS batteries. However, revenues in the segment saw a double digit growth owing to better realizations driven by price hikes and better product mix.


  • Operating profit surged by 23.4% yoy and OPM expanded by 141bps yoy but declined 17bps qoq. Price hikes and soft commodity prices helped margin expansion. Margins were much ahead of expectations and resultantly profit growth was higher at 17.4% yoy.


  • While the expansion of capacity in the automotive business division is progressing as per schedule, the company expanded the Quanta product range batteries in the industrial segment with introduction of 12V-120 Ah and 12V-150 Ah batteries.


  • In January 2014, the company commissioned a fully integrated MVRLA battery plant in a new location at Chittoor in Andhra Pradesh. The trial runs and product validation process is under way and the plant is expected to commence supplies full scale from March 2014.


  • We see decent visibility in terms of volume growth for ARBL on the back of back of strong sales of VRLA batteries made to OE’s in FY10 and FY11. We build in revenue CAGR of 16% over FY13-16E owing to robust replacement demand and forecast 15% PAT CAGR over the same period. We maintain our BUY rating with a revised price target of Rs375.

Result table
(Rs m)
Q3 FY14
Q3 FY13
% yoy
Q2 FY14
% qoq
Net sales
8,629
7,607
13.4
8,071
6.9
Material costs
(5,660)
(5,026)
12.6
(5,262)
7.6
Personnel costs
(392)
(320)
22.6
(392)
0.2
Other overheads
(1,074)
(1,043)
3.0
(997)
7.7
Operating profit
1,503
1,218
23.4
1,420
5.9
OPM (%)
17.4
16.0
141 bps
17.6
(17) bps
Depreciation
(157)
(132)
18.6
(154)
1.7
Interest
(0)
(1)
(71.6)
(1)
(40.0)
Other income
73
71
3.0
74
(1.2)
PBT
1,419
1,155
22.8
1,339
6.0
Tax
(469)
(346)
35.5
(393)
19.2
Effective tax rate (%)
33.0
30.0
29.4
Reported PAT
950
809
17.4
946
0.5
Adj. PAT margin (%)
11.0
10.6
37 bps
11.7
(71) bps
Ann. EPS (Rs)
22.2
18.9
17.4
22.1
0.5
Source: Company, India Infoline Research
 
Cost analysis
BSE 779.75 7.90 (1.02%)
NSE 780.55 9.60 (1.25%)

***Note: This is a NSE Chart

 

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