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MOSL: Morning India (21/March/18): 1. Automobiles (Batteries: Huge opportunities, but challenges too); 2. Financials

MOrning India (21/March/18): 1. Automobiles (Batteries: Huge opportunities, but challenges too); 2. Financials

 

Today’s top research theme

Automobiles (Batteries: Huge opportunities, but challenges too; Exide and Amara Raja at the forefront)

• The battery industry is evolving, led by cyclical slowdown in the auto battery segment as well as competitive pressures in the industrial battery segment.
• GST would drive consolidation in the replacement market of automotive and inverter batteries, leading to strong growth of 16-17% for the organized players.
• New segments in industrial batteries – e-rickshaw, motive power, and solar applications – would drive growth, as conventional drivers of this segment stabilize.
• Electric vehicles (EVs) are unlikely to displace lead acid batteries (LAB), as these are still preferred for SLI (starter, lighting and ignition) application. Manufacturing of Li-ion batteries could be a USD42b opportunity by 2030 (~9x of LAB).
• While we like both AMRJ and EXID, we prefer EXID over AMRJ due to its cheaper valuations (~30% discount to AMRJ after adjusting for insurance business value).

Piping hot news

Centre scraps duty on sugar to boost exports

• In a move that will help the domestic sugar industry which is staring at a surplus production in the current season, the government on Tuesday scrapped the export duty on sugar, giving mills a better way to deal with the glut. A notification issued by the Central Board of Excise and Customs said export duty on raw, white and refined sugar has been reduced from 20 per cent to nil. The 20 per cent export duty was in force since June 2016.