15 June 2021
Company Update | Sector: Automobile
Amara Raja
BSE SENSEX
52,773
S&P CNX
15,869
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CMP: INR785
TP: INR860 (+10% )
Neutral
New Energy and LAB exports to be the key growth drivers
Targeting 8-10GW of li-ion capacity to remain cost competitive
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
AMRJ IN
171
134 / 1.8
1025 / 635
-7/-31/-37
1015
Financials & Valuations (INR b)
Y/E March
2021 2022E 2023E
Sales
71.5
83.0
92.2
EBITDA
11.2
12.4
14.5
Adj. PAT
6.5
7.0
8.2
EPS (INR)
37.9
41.2
47.9
EPS Gr. (%)
-2.1
8.7
16.4
BV/Sh. (INR)
247
275
308
Ratios
RoE (%)
16.4
15.8
16.4
RoCE (%)
16.3
15.8
16.4
Payout (%)
29.0
30.4
31.3
Valuations
P/E (x)
20.7
19.1
16.4
P/BV (x)
3.2
2.9
2.5
Div. Yield (%)
1.4
1.6
1.9
FCF yield (%)
1.6
4.9
4.2
Shareholding pattern (%)
As On
Mar-21 Dec-20
Promoter
28.1
28.1
DII
12.6
14.5
FII
21.3
20.9
Others
38.0
36.5
FII Includes depository receipts
Amara Raja’s senior management team presented (click
here for the
presentation)
their new strategic initiative, laying down future growth drivers in
the form of New Energy and Mobility. Key highlights from the meeting:
Under this strategy, it is focused on value maximization in its core Lead Acid
Battery (LAB) business and is foraying into the New Energy business in the form
of lithium-ion cell/battery pack, EV charging products, energy storage solutions,
etc.
While the LAB business will go global, the New Energy business will focus on
opportunities in India.
While growth in LAB will recover strongly, deliverance of 15-17% CAGR over five
years is largely dependent on successful execution of its export strategy.
While its entry in the New Energy business is a step in the right direction, its
success will be dependent on a technology partner, cost competitiveness,
targeted segments, etc.
For lithium cell manufacturing, it is targeting 8-10GW capacity (needing an
investment of USD0.8-1b) to attain global competitiveness.
Considering that investment in the New Energy business will be over 5-10 years,
it can fund this capex through free cash flows of the core business (average
INR3-4b p.a) and debt (currently net cash on its Balance Sheet).
New Energy a new growth engine
Mar-20
28.1
11.6
20.9
39.4
In the New Energy business, it is looking to be more than a battery
company and participate in the bigger storage ecosystem. It would focus
on Li-ion cell and pack, EV charging products, energy storage systems, and
home energy solutions.
AMRJ is exploring partnerships with various organizations. In the last 2-3
years, it has undertaken pilot scale R&D and cell manufacturing on its own
to understand the technology. It is open to various structures from
technical collaborations to JVs. It is also aiming to leverage the startup
ecosystem.
While large global players may not be keen to partner with AMRJ, smaller
players may be interested in partnering with AMRJ as it offers good brand,
relationships with OEMs, reach, etc.
It expects 2Ws and 3Ws to see faster electrification, with 10%/46% EV
penetration in 2Ws/3Ws by FY25. It doesn't expect 2W/3W OEMs to
backward integrate into cell manufacturing, which opens up the
opportunity for players like AMRJ. As per AMRJ’s estimates, India would
need a Li-ion battery capacity of 30GW/150GW by CY25/CY30.
All these new Energy businesses would be part of the listed entity.
15 June 2021
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P
1
Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Jinesh Gandhi – Research Analyst
(Jinesh@MotilalOswal.com)
Vipul Agrawal – Research Analyst
(Vipul.Agrawal@motilaloswal.com)