Amara Raja
Batteries Ltd (ARBL) is one of the best plays on the ensuing surge in
replacement demand for automotive batteries in the domestic market. During
FY09-12, passenger car sales in the domestic market registered a CAGR of 18.2%
and 2-wheeler sales witnessed a CAGR of 21.8%. With replacement cycle for
batteries in a passenger car of 30-36 months and that of a switch-start 2-wheeler
of 24-30 months, substantial jump in replacement demand can be seen in the near
future. As compared to past, 2-wheeler battery replacement market is likely to
increase in size. This can be mainly attributed to the rising proportion of
switch-start 2-wheelers in the domestic sales.
Steady
increase in automotive market share
ARBL has
gained a strong foothold in the replacement market for the automotive with a
steady increase in market share in the segment. Even with the OEMs, the company
has been able to get into its fold most incumbent players and is in discussions
to enter into tie-ups with new entrants.
Industrial
segment to add to momentum
The
industrial segment is mainly driven by demand for UPS led by investments in IT
industry and towers in the telecom segments. Battery demand in the UPS segment,
which has witnessed a 15% growth, is expected to continue given that
investments in computerization by India Inc has been on a rise. While pace of
new addition of new telecom towers has slowed down, replacement of batteries in
the existing towers is due which will keep demand growth from the segment
robust.
Strong
revenue and profit growth, attractive valuations
ARBL, to capture
these growth opportunities is expanding capacities in all segments by nearly
50% by H2 FY15. The company has been performing better than Exide in the past
few quarters on all counts. This has triggered a re-rating in the stock. We
expect the performance to continue on both revenue and profitability fronts with
estimates of a revenue and PAT CAGR of 22%
and 26% respectively between FY12-15E.
Courtesy and Source : IIFL Ltd.
Note : Amara Raja Batteries Ltd is a Shariah Compliant stock and hence those investors who are following shariah guidelines can also invest in this stock. Its Ethical to invest in this particular stock as of today 9th April, 2013. We will update if this stock is removed from the list of Shariah Compliant Companies.
Note : Amara Raja Batteries Ltd is a Shariah Compliant stock and hence those investors who are following shariah guidelines can also invest in this stock. Its Ethical to invest in this particular stock as of today 9th April, 2013. We will update if this stock is removed from the list of Shariah Compliant Companies.
