Amara Raja (Q1 FY14)

India Infoline News Service | Mumbai |

Amara Raja reported very good Q1 FY14 results wherein we observed a significant positive beat to our estimates both at revenue and profit level.

CMP Rs276, Target Rs320, Upside 15.9%

  • Amara Raja reported very good Q1 FY14 results wherein we observed a significant positive beat to our estimates both at revenue and profit level.  Net sales at Rs8,938mn and OPM of 16.3% were ahead of our expectations leading to better than estimated PAT growth. Revenue grew robustly and surged by 28.4% yoy and 11.2% qoq. A robust topline (highest ever quarterly revenues) was recorded on back of significant growth observed in both automotive battery and industrial battery segments. 


  • Despite a weak macro situation, automotive battery volumes grew on back of robust replacement demand in the market. We also note, in the 2W battery division, the company commenced supplies to the new plant of HMSI (Karanataka) during the quarter. In the industrial battery division, replacement demand from the telecom sector continued to remain robust. 


  • OPM at 16.3%, though looked down 89bps yoy but sequentially recovered 235bps qoq and was better than expectations. Gross margins improved by 200bps qoq as the average lead prices (in rupee terms) in the quarter cooled off ~7% qoq.  The margins were further helped by a delayed price hike which was taken in previous quarter. Depreciation expense looked 45.7% lower qoq mainly owing to a provision created towards impairment of certain assets in Q4 FY13. PAT for the quarter at Rs978mn was far ahead of the estimates and saw healthy expansion of 28.5% yoy and 64.1% qoq.


  • In the industrial battery segment the capacity expansion from 1.8mn units to 3.6mn units per annum in medium VRLA product line and to 900mn AH per annum in large VRLA product line is being carried out and expected to commence supplies in H2 FY14. It will help the company to fully capitalize the growing demand for its telecom and UPS batteries.


  • 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 22% over FY13-15E owing to robust replacement demand and forecast 19% PAT CAGR over the same period. Assigning a P/E of 13x to FY15E EPS we achieve a revised price target of Rs320 and thereby maintain BUY on the stock.

Result table
(Rs m)
Q1 FY14
Q1 FY13
% yoy
Q4 FY13
% qoq
Net sales
8,938
6,962
28.4
8,038
11.2
Material costs
(5,969)
(4,654)
28.3
(5,529)
8.0
Personnel costs
(385)
(292)
31.6
(352)
9.3
Other overheads
(1,130)
(821)
37.6
(1,037)
8.9
Operating profit
1,454
1,194
21.7
1,119
29.9
OPM (%)
16.3
17.2
(89) bps
13.9
235 bps
Depreciation
(145)
(129)
12.3
(267)
(45.7)
Interest
(0)
(1)
(31.4)
(3)
(87.0)
Other income
96
59
64.8
71
35.7
Extra ordinary items
-
-

2

PBT
1,405
1,123
25.1
922
52.4
Tax
(427)
(362)
17.8
(326)
30.9
Effective tax rate (%)
30.4
32.3
(187) bps
35.4
(498) bps
Reported PAT
978
761
28.5
596
64.1
Ann. EPS (Rs)
22.9
17.8
28.5
14.0
64.1
Source: Company, India Infoline Research

Cost analysis
As a % of net sales
BSE 779.75 7.90 (1.02%)
NSE 780.55 9.60 (1.25%)

***Note: This is a NSE Chart

 

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