MOSL: AMARA RAJA BATTERIES (Buy)-In-line operating performance-PAT above est

Amara Raja Batteries: In-line operating performance; PAT above est. led by higher other income

(AMRJ IN, Mkt Cap USD2.2b, CMP INR845, TP INR1035, 23% Upside, Buy)

• Revenue in-line, helped by growth in auto, UPS and telecom segments: Net sales grew 17.1% YoY (+8.8% QoQ) to INR15.5b (in-line), led by growth in auto across the OE and aftermarket segments. This was led by continued channel expansion of Amaron and Powerzone brands. Further, higher exports to South-East Asia and Middle-East countries aided growth in the auto segment. Industrial battery segment too recorded growth, backed by higher sales in UPS segment and a sequential increase in volumes in the telecom segment.
• EBITDA margin in line at 15.6%; lead inflation partially offset by price hike: Gross margin shrunk 90bp YoY (-190bp YoY) to 33% (in-line). Management indicated that continued lead price inflation was partially offset by appropriate pricing actions. EBITDA margin expanded 20bp YoY (-110bp YoY) to 15.6%, led by a favorable product mix (higher share of autos), optimal utilization, and price hikes. High other income and low depreciation boosted PAT by 20% YoY (+5.7% QoQ) to INR1.34b (est. of INR1.24b).