Amara Raja (Q4 FY13)

India Infoline News Service | Mumbai |

A robust topline was recorded on back of double digit growth recorded in both automotive battery business and industrial battery segments. Despite a weak macro situation, automotive battery volumes grew on back of robust replacement demand in the market.

CMP Rs265, Target price Rs320, Upside 20.7%

Amara Raja reported weak Q4 FY13 results wherein its bottomline sharply missed our estimates owing to weak operational performance. While net sales at Rs8,038mn were in line with our expectations, OPM nose dived to 13.9% in the quarter gone by. Revenue grew robustly and surged by 19.4% yoy and 5.7% qoq. A robust topline was recorded on back of double digit growth recorded in both automotive battery business and industrial battery segments.  Despite a weak macro situation, automotive battery volumes grew on back of robust replacement demand in the market.

OPM at 13.9%, much below ours and street expectations, contracted by 22bps yoy and 209bps sequentially over the previous quarter. The material costs rose sharply in quarter and were higher by 274bps yoy and 272bps qoq. It was on back of consistent surge in lead prices till major part of Q4 FY13. Further, depreciation costs came in higher (+119% yoy) mainly owing to a provision of Rs75.52mn created towards impairment of certain assets.

Mainly owing to beat at operational level, the PAT for the quarter at Rs596mn was far below the estimates and saw a contraction of 26.3% qoq and 2.3% yoy. However we note that the lead prices have fallen sharply at the end of the quarter and a delayed price hike has been taken by the company. We expect these benefits to cushion the margins in quarter ahead.

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 from Q3 FY14. In the automotive segment, we note that the board has approved investments for enhancing the 4W battery capacity from 5.6mn units to 8.25mn units and 2W battery capacity from 4.8mn units to 8.4mn units. The company has committed to invest Rs7.6bn on the various such capacity enhancement projects.

The margin performance has been weak in the quarter and was a disappointment. We slightly revise our estimates downward on the operational level.  However the significant positive remains the decent visibility in the volume growth which is expected to continue on back of strong sales of VRLA batteries made to OE’s in FY10 and FY11. We build in revenue CAGR of 21% over FY13-15E on back of robust replacement demand but moderate our assumptions on the operating level and forecast 19% PAT CAGR over the same period. Assigning 13x to FY15E EPS we achieve a revised price target of Rs320 and thereby maintain BUY on the stock.

Result table
(Rs m) Q4 FY13 Q4 FY12 % yoy Q3 FY13 % qoq
Net sales 8,038 6,734 19.4 7,607 5.7
Material costs (5,529) (4,447) 24.3 (5,026) 10.0
Personnel costs (352) (243) 45.1 (320) 10.1
Other overheads (1,037) (1,091) (5.0) (1,043) (0.6)
Operating profit 1,119 952 17.5 1,218 (8.1)
OPM (%) 13.9 14.1 (22) bps 16.0 (209) bps
Depreciation (267) (122) 118.7 (132) 102.3
Interest (3) (1) 149.7 (1) 155.6
Other income 71 37 91.3 71 0.6
Extra ordinary items 2 -
-
PBT 922 866 6.4 1,155 (20.2)
Tax (326) (283) 15.1 (346) (5.8)
Effective tax rate (%) 35.4 32.7 265 bps 30.0 541 bps
Reported PAT 596 583 2.3 809 (26.3)
Ann. EPS (Rs) 14.0 13.6 2.3 18.9 (26.3)
Source: Company, India Infoline Research

Cost analysis
As a % of net sales Q4 FY13 Q4 FY12 bps yoy Q3 FY13 bps qoq
Material costs 68.8 66.0 274 66.1 272
Personnel Costs 4.4 3.6 78 4.2 18
Other overheads 12.9 16.2 (330) 13.7 (81)
Total costs 86.1 85.9 22 84.0 209
Source: Company, India Infoline Research

Financial Summary
Y/e 31 Mar (Rs m) FY12 FY13 FY14E FY15E
Revenues 23,809 29,811 36,754 43,370
yoy growth (%) 35.2 25.2 23.3 18.0
Operating profit 3,561 4,712 5,770 6,852
OPM (%) 15.0 15.8 15.7 15.8
Reported PAT 2,151 2,959 3,648 4,192
yoy growth (%) 45.2 37.6 23.3 14.9





EPS (Rs) 12.6 17.3 21.4 24.5
P/E (x) 21.2 15.4 12.5 10.9
Price/Book (x) 5.5 4.3 3.3 2.6
EV/EBITDA (x) 12.4 9.0 7.7 6.6
Debt/Equity (x) 0.1 0.1 0.1 0.1
RoE (%) 29.3 31.4 30.0 27.1
RoCE (%) 37.9 41.2 41.0 37.6
Source: Company, India Infoline Research
BSE 779.75 7.90 (1.02%)
NSE 780.55 9.60 (1.25%)

***Note: This is a NSE Chart

 

Advertisements

  • Save upto Rs.2.67 lakh with Pradhan Mantri Awas Yojana ...Know more
  • Now Save Rs.3150 on your Demat Account ...Click here
  • Now get IIFL Personal Loan in just 8* hours...APPLY NOW!
  • Get the most detailed result analysis on the web - Real Fast!
  • Actionable & Award-Winning Research on 500 Listed Indian Companies.