MOSL: Amara Raja Batteries (Buy): Weak OEM, Telecom impacts revenue growth
Amara Raja Batteries: Weak OEM, Telecom impacts revenue growth; Mix, decline in RM drives margins
(AMRJ IN, Mkt Cap USD1.5b, CMP INR625, TP INR761, 22% Upside, Buy)
- First revenue decline since 1QFY10: Revenues declined by 1% YoY to INR15.7b (our est. INR16.9b), impacted by lead price pass-through (in 40-50% of the business). The healthy volume growth in aftermarket (4W - 11-12% YoY, 2W - 18-20% YoY) and exports (15-20% YoY) was offset by ~10% YoY decline in automotive OEM and flat volumes in the industrial segment, even as telecom volumes declined 10-15%.
- Product mix and decline in lead prices help EBITDA margins: Gross margins improved 200bp QoQ (+350bp YoY) to 34.8% (our est. 32.4%) led by favorable product mix and decline in lead prices (~13% YoY, flat QoQ). It has not taken any price increase in the aftermarket segment in 4QFY19. EBITDA margin expanded 60bp QoQ (+220bp YoY) to 15.5%, while Adj. PAT grew 8.7% YoY to INR1.19b (INR1.24b). FY19 revenue/EBITDA/adj. PAT grew 12%/7.8%/2.6%.
Amara Raja Batteries engaged in the manufacture and sale of lead acid storage batteries for industrial and automotive applications in India. Co.'s industrial products include Powerstack batteries for use in telecommunications, power utilities, railways, defense, and other heavy industrial applications; and Amaron Quanta, a UPS battery with a back-up for a back-up. Co. offers automotive products, which include PRO, FLO, GO, Black, Fresh, Hi-way, Harvest, Shield, Pro Bike rider, and Optima batteries under the Amaron brand name. Co. supplies automotive batteries to various original equipment manufacturers.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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