Amara Raja shares rally 33% in 3 days; here's what analysts suggest for this TDP-linked stock

Shares of Amara Raja Energy & Mobility Ltd, formerly known as Amara Raja Batteries Ltd, extended its gains and surged around 10 per cent during the trading session on Thursday amid the buzz that Telugu Desam Party (TDP), an NDA ally, is seen playing a vital role in the formation of next government under Narendra Modi.

Amara Raja, amid the buzz on Dalal Street, is being associated with TDP but there is no direct connection with the Naidu-led political party. Its prevailing managing director Galla Jayadev (Jay Galla) is a former TDP Parliamentary Party Leader. Galla, a two-time MP and head of Amara Raja group, refused to contest Lok Sabha elections this time.

Amara Raja's stock surged more than 9.60 per cent to Rs 1,332.75, hitting a new 52-week high, on Thursday with its total market capitalisation surging near Rs 25,000 crore mark. The stock had settled at Rs 1,216 in the previous trading session on Wednesday.

Shares of the company have zoomed about 125 per cent from its 52-week low at Rs 599, hit on October 26, 2023. The stock has rallied more than 33 per cent from its low around Rs 1,004 on Tuesday, June 4. The counter is up 60 per cent in the year 2024 so far.

The Telugu Desam Party (TDP), which won 16 Lok Sabha seats under Chandrababu Naidu, may seek a Speaker's post besides health department, rural development, and transport portfolios, sources told India Today on Wednesday. Against a magical mark of 272, BJP managed to secure 240 seats while its NDA alliance settled with 292 seats.

Amaara Raja will incur significant capex to become future ready in the Li-ion segment. 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 about 45GWh by FY30E, said Elara Capital's report.

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 margin expansion of 80 basis points, it added reiterating an 'accumulate' tag with a revised.target price of Rs 1,341.

Amara Raja’s adjusted Ebitda came up 21 per cent on a year-on-year (YoY) basis, led by strong top-line growth. Standalone revenues increased by 15 per cent YoY, led by strong growth in the aftermarket and export segments, said Kotak Institutional Equities in its recent report, reinstating coverage on the stock.

The lead-acid business performance will remain steady in the medium term. There exists a terminal risk to the business, as we expect the industry to shift toward the lithium battery business. The company is also lagging behind in terms of capacity and technological partnership compared with competitors in the LiB business, it added with a 'sell' tag and a fair value of Rs 1,000.

While the market seems to be upbeat about Amara Raja's lithium-ion foray, we remain circumspect about the returns from the business, said Motilal Oswal Financial Services, citing the fair valuations of the stocks. It maintained its 'neutral' stance on the stock with a target price of Rs 1,090 on it.

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