MOSL: AMARA RAJA BATTERIES (Buy)-Below est. as lag in cost pass-through hurts margin-Market share gains continue
​Amara Raja Batteries: Below est. as lag in cost pass-through hurts margin; Market share gains continue
(AMRJ IN, Mkt Cap USD2.2b, CMP INR838, TP INR1044, 25% Upside, Buy)
- Strong growth in Automotive drives revenue: Net sales grew ~17.4% YoY to INR13.4b (in-line), driven by growth in Automotive 4W (+12% YoY), Tubular products (+29% YoY), UPS (+10% YoY) and exports. Price hikes of up to 10% in the replacement market also aided growth. While demon impacted sales in 2W (flat growth QoQ in Replacement and OEM), Industrial revenue was flat due to weak sales in Telecom and deferment of orders to Railways. FY17 net sales grew 15%, driven by double-digit growth in OEM and Replacement segments.
- Higher RM costs dampen margins: EBITDA margin shrunk 310bp YoY (~170bp QoQ) to 13.7% (est. of 16%) as the impact of price hike in Telecom and UPS/Inverter would be seen with a lag. However, lower other expenses (-245bp YoY, -110bp QoQ to 13%) restricted EBITDA margin contraction. PAT fell 9% YoY (-12% QoQ) to INR992m (est. of ~INR1.2b). In FY17, EBITDA grew 3.3% to INR8.5b, with the margin contracting 180bp to 16%. PAT fell 2.7% to INR4.8b.
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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