Accumulate Amara Raja Energy & Mobility Ltd. For Target Rs. 1,341 - Elara Capital
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All eyes on tech partner for Li-ion cells
Automotive volume drives revenue growth
Amara Raja Energy & Mobility (AMRJ IN) Q4 standalone revenue grew 15% YoY while down 3% QoQ to INR 28bn. Lead acid volume was up 19%, driven by good growth in the 2W segment. EBITDA rose 16% YoY and declined 6% QoQ to INR 4.1bn. EBITDA margin stood at I4.6%, flat YoY and down 50bp QoQ. The company has completed the acquisition of the plastics division of Mangal Industries, which led to ~80bps higher margin in the restated financials. In Q4, revenue from the new energy business grew 30%, led by good volume growth in chargers & battery packs for 3W and other segments.
Cell manufacturing production to commence from H2FY26
AMRJ has not undertaken any price hikes in H1 as RM prices remain stable to date. Management has set a target for annual capex of INR 11- 12bn on the cell manufacturing facility for the next two years and expects it to commence from H2FY26. The company expects optimum asset turnover of 1.3-1.4x and ROs of 12-15% once the cell manufacturing facility reaches capacity of 10-11GWh. It is actively looking for a partner with strong technology and R&D
Valuation: reiterate Accumulate with a higher TP of INR 1,341
AMRJ will incur significant capex to become future ready in the Li-ion segment (FCF may take a hit in the medium term). The next leg of valuation re-rating is likely if it is able to tie up with a large firm for technology tie-up in the Li-ion cell space, which could open up the PV Li-ion cell opportunity size of ~45GWh by FY30E, in our view. We continue to monitor new order wins in the lithium-ion space, especially for anchor customers in the 2W space. Auto replacement demand will keep core business revenue and profitability insulated from the cyclicality of the OEM business. We expect a revenue CAGR of 9%, an EBITDA CAGR of 13% and a PAT CAGR during FY24-26E, with margin expansion of 80bp. We reiterate Accumulate with a higher TP of INR 1,341 from INR 1,031 on 20x (from 15x) on June 2026E P/E.
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SEBI Registration number is INH000000933
