Reduce Amara Raja Batteries; target of Rs 700: ICICI Direct

ICICI Direct recommended reduce rating on Amara Raja Batteries with a target price of Rs 700 in its research report dated May 25, 2021.

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var titStr=”;var editw=”; var typevar=”; var pparr= new Array(‘Monitoring your investments regularly is important.’,’Add your transaction details to monitor your stock`s performance.’,’You can also track your Transaction History and Capital Gains.’); var phead =’Why add to Portfolio?’; if(secglbVar ==1) { var stkdtxt=’this stock’; var fltxt=’ it ‘; typevar =’Stock ‘; if(lastRsrs.length>1){ stkdtxt=’these stocks’; typevar =’Stocks ‘;fltxt=’ them ‘; } } //var popretStr =lvPOPRHS(phead,pparr); //$ (‘#poprhsAdd’).html(popretStr); //$ (‘.btmbgnwr’).show(); var tickTxt =’‘; if(typparam1==1) { var modalContent = ‘Watchlist has been updated successfully.’; var modalStatus = ‘success’; //if error, use ‘error’ $ (‘.mc-modal-content’).text(modalContent); $ (‘.mc-modal-wrap’).css(‘display’,’flex’); $ (‘.mc-modal’).addClass(modalStatus); //var existsFlag=$ .inArray(‘added’,newappndStr[1]); //$ (‘#toptitleTXT’).html(tickTxt+typevar+’ to your watchlist’); //if(existsFlag == -1) //{ // if(lastRsrs.length > 1) // $ (‘#toptitleTXT’).html(tickTxt+typevar+’already exist in your watchlist’); 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ICICI Direct’s research report on Amara Raja Batteries

Amara Raja Batteries (ARBL) reported steady Q4FY21 results. Net sales rose 33% YoY, 7.3% QoQ to Rs 2,103 crore. As per management commentary, demand during the quarter was strong across all automotive and industrial segments. Margins were at 15.1% (down 50 bps QoQ) amid 130 bps gross margin contraction and increase in other expenses on percentage of sales basis. PAT grew 39% YoY (down 2% QoQ) to Rs 189 crore. ARBL declared a total dividend of Rs 11/share for FY21.

Outlook

We expect 7.4% FY21-23E PAT CAGR for ARBL. While the company currently trades at reasonable valuations, we maintain our REDUCE rating, valuing it at Rs 700 i.e., 16x FY23E EPS (earlier target price Rs 800) on account of (a) expected softening of margin profile and (b) imminent EV threat.

For all recommendations report, click here

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