Shares of Amara Raja Energy & Mobility Ltd fell 5 per cent in Tuesday's trade after the company's September quarter results. The stock fell 4.57 per cent to hit a low of Rs 1,311 on BSE. Despite this, the scrip is up 60 per cent in 2024 so far.
Nuvama Institutional has cut its FY25–27 Ebitda estimates for Amara Raja by 3–4 per cent to factor in lower margin assumption. It is building in FY24–27 core (lead acid battery) revenue and Ebitda CAGRs of 9 per cent and 10 per cent, respectively. For now, the brokerage suggested a target price of Rs 1,580 on Amara Raja Energy & Mobility.
"Amara Raja is doubling down on EVs with lithium cell plants for NMC/LFP chemistries slated to come on stream in FY26E/28E. Retain ‘BUY’ with a revised target price of Rs 1,580 (earlier Rs 1,980) based on 15 times Sep-26E EPS for the lead acid battery business, 2 times investment value (earlier 3 times) for the lithium business and Rs 23 oer share for Inobat/Log9 investments. We apply a lower multiple to the lithium business in the wake of surging competitive intensity and the miss on PLI benefits," the brokerage said.
Amara Raja reported a 6.3 per cent YoY rise in profit at Rs 240.70 crore for the second quarter compared with Rs 226.4 crore in the corresponding quarter last year. Its sales rose 11.6 per cent to Rs 3,135.8 crore from Rs 2,811.1 crore YoY.
Nuvama said Amara Raja has started assembling lithium battery packs and manufacturing chargers. It is supplying battery packs to customers in the 2W, 3W and industrial segments (Piaggio, Mahindra, Omega SEKI, Indus Towers, BSNL, etc). The company is working on a small lithium-ion cell manufacturing facility with 2GWH capacity with NMC chemistry, which is slated to come on stream in FY26.
"In addition, it is working on 4–5GWH capacity with LFP chemistry, which is likely to come on stream in FY28E. The company’s ten-year plan is to expand capacity to 16GWH at aggregate investment of INR95bn. Furthermore, to sharpen its focus on the new energy business, Amara Raja has invested in start-ups such as Log9 and Inobat," it said.