6 August 2014
1QFY15 Results Update | Sector:
Automobiles
Amara Raja Batteries
BSE SENSEX
25,665
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
7,672
AMRJ IN
170.8
88.2/1.4
520/208
5/21/97
Financials & Valuation (INR Million)
Y/E March
Net Sales
EBITDA
Adj PAT
EPS (INR)
Gr. (%)
BV/Sh (INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
2015E
7,286
4,186
24.5
13.1
98.0
27.6
38.5
21.1
5.3
2016E
2017E
42,092 51,048 59,612
9,153 10,704
5,314
31.1
27.0
121.2
28.4
40.0
16.6
4.3
6,376
37.3
20.0
149.0
27.6
39.2
13.8
3.5
CMP: INR517
TP: INR560
Buy
Strong operational performance, outlook remains robust
AMRJ’s 1QFY15 operational performance was above expectation driven by
higher-than-expected revenue and margins.
Net sales grew 15.1% YoY (+15.9% QoQ) to INR10.3b (est. of INR9.8b).
EBITDA margin at 17.1% (est. 16.6%) improved by 80bp YoY/160bp QoQ.
Other expenditure declined 130bp QoQ (100bp YoY) driven by lower share of
home UPS (trading business) and cost reduction measures (particularly for
power & fuel).
Despite the robust 20.7% YoY EBITDA growth, PAT growth was restricted to
8.3% to INR1.06b (est. INR1.03b) on higher depreciation charge (as per the
provisions of new Companies Act).
Takeaways from management interaction:
Robust volume growth in industrial (22%
YoY) and 2Ws (78% YoY). 4W volumes grew 2% YoY, with OEM growth of 3%. 15%
growth in 4W replacement demand was offset by a decline in demand in private
label manufacturing. Exports grew 20% (~5% of revenue). Demand outlook remains
robust across segments. Margin guidance of 16-16.5% levels as cost pressures are
fairly benign. Capacity expansion plans on track and expect to gain market share.
Capex guidance of INR5b/1.5-2b for FY15/16 respectively.
Upgrade earnings and target price, maintain Buy:
Considering superior 1Q
performance and improved business outlook, we upgrade FY15E/16E EBITDA by
5%/6.8%; though EPS upgrade is restricted to 1.8%/3.2% on higher depreciation
charge. The stock trades at 21.1x/16.6x FY15E/16E EPS of INR24.5/31.1 respectively.
Maintain
Buy.
Chirag Jain
(Chirag.Jain@MotilalOswal.com); +91 22 3982 5418
Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 3982 5416
Investors are advised to refer through disclosures made at the end of the Research Report.

Amara Raja Batteries
Net sales growth recovers to 15%
Stable gross margins QoQ
Source: Company, MOSL
Source: Company, MOSL
EBITDA margin improves on cost reduction measures
PAT growth restricted on higher depreciation charges
Source: Company, MOSL
Source: Company, MOSL
Lead prices have declined by 3.4% QoQ (in INR terms) in 1QFY15
160,000
135,000
110,000
85,000
60,000
INR/tonne
USD/tonne
3,500
3,000
2,500
2,000
1,500
Source: Industry, MOSL
6 August 2014
2

Amara Raja Batteries
Story in charts: Robust 20% EPS CAGR expected over FY14-17E
Expect net sales to register a CAGR of 20.1% over FY14-17E
Expect margins to sustain and improve to 18% by FY17E
Source: Company, MOSL
Source: Company, MOSL
Depreciation to increase on new capacity, norms change
Strong EPS growth of 19.9% over FY14-17E
Source: Company, MOSL
Source: Company, MOSL
FCF to turn positive in FY16E/17E
Return ratios to remain strong
Source: Company, MOSL
Source: Company, MOSL
6 August 2014
3

Amara Raja Batteries
Amara Raja Batteries: an investment profile
Company description
Commencing operations in 1992, AMRJ has become
India’s second-largest lead-acid battery manufacturer
(next to market leader EXID), with market leadership in
telecom and UPS segments. It is reckoned as one of the
pioneers in VRLA (valve regulated lead acid) batteries.
Johnson Control USA (JC) is an equal partner and
acquired 26% equity in AMRJ in 1997.
Recent developments
During 1QFY15, AMRJ commenced supplies to
HMSI (2W batteries) for their Karnataka plant
Valuation and view
The stock trades at 21.1x/16.6x FY15E/16E EPS of
INR24.5/31.1 respectively.
Maintain
Buy
with a TP of INR560.
Key investment arguments
Sector view
Robust growth in battery industry driven by both
auto and industrial segment on economic recovery
Battery industry structure remains duopoly, with
huge unorganized segment to tap into.
New capacity coming on stream on opportune time.
Benign lead lost coupled with recovery in volume
growth and stable competitive environment augurs
well for sustainability of superior margins.
Battery industry is a good proxy play on auto
industry. While near term auto demand outlook
is weak, over the long term auto industry offers
healthy growth opportunity.
Growth in industrial battery revenues is driven by
growth in economic activity, power shortages and
weather conditions (temperature).
Key investments risks
Continued economic slowdown could further put
pressure on revenue growth.
Resurgence of Exide in the 4W replacement
segment could heighten competitive risk.
EPS: MOSL forecast v/s consensus (INR)
EXID
P/E (x)
EPS Gr (%)
RoE (%)
EV/EBITDA (x)
FY15E
FY16E
FY15E
FY16E
FY15E
FY16E
FY15E
FY16E
21.2
16.4
31.8
28.9
15.4
17.2
10.8
8.3
AMRJ
21.1
16.6
13.1
27.0
27.6
28.4
12.0
9.2
FY15
FY16
MOSL
Forecast
24.5
31.1
Consensus
Forecast
24.2
29.2
Variation
(%)
1.2
6.6
Comparative valuations
Target price and recommendation
Current
Price (INR)
517
Target
Price (INR)
560
Upside
(%)
8.3
Reco
Buy
Stock performance (1-year)
Shareholding pattern (%)
Jun-14
Promoter
DII
FII
52.1
9.5
16.9
Mar-14
52.1
11.6
15.0
21.3
Jun-13
52.1
14.2
10.8
22.9
Others
21.5
Note: FII Includes depository receipts
6 August 2014
4

Amara Raja Batteries
Financials and valuations
Income statement
Y/E March
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
2014
34,367
16.0
5,603
16.3
646
4,958
7
455
39
5,367
1,692
31.5
3,674
3,701
26.3
2015E
42,092
22.5
7,286
17.3
1,301
5,985
9
300
0
6,275
2,090
33.3
4,186
4,186
13.1
(INR Million)
2016E
51,048
21.3
9,153
17.9
1,626
7,527
9
450
0
7,968
2,653
33.3
5,314
5,314
27.0
2017E
59,612
16.8
10,704
18.0
1,786
8,918
9
650
0
9,559
3,183
33.3
6,376
6,376
20.0
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
2014
21.7
25.4
79.8
3.2
17.6
23.8
20.3
6.5
2.5
15.4
0.6
30.6
40.9
2.3
43.0
35.6
20.0
0.1
2015E
24.5
32.1
98.0
5.2
25.5
21.1
16.1
5.3
2.1
12.0
1.0
27.6
38.5
2.4
43.0
35.6
21.8
0.0
2016E
31.1
40.6
121.2
6.6
25.5
16.6
12.7
4.3
1.6
9.2
1.3
28.4
40.0
2.3
43.0
35.3
23.4
0.0
2017E
37.3
47.8
149.0
7.9
25.5
13.8
10.8
3.5
1.3
7.4
1.5
27.6
39.2
2.2
43.0
35.3
24.2
0.0
Balance sheet
Y/E March
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
2014
171
13,456
13,627
843
301
14,772
10,508
3,860
6,649
1,030
161
13,555
3,350
4,528
2,946
2,731
6,623
3,435
3,188
6,932
14,772
2015E
171
16,574
16,745
773
383
17,901
15,508
5,160
10,348
1,000
161
14,558
4,100
5,546
1,567
3,345
8,166
4,358
3,807
6,392
17,901
(INR Million)
2016E
2017E
171
171
20,533 25,283
20,704 25,453
773
773
486
611
21,963 26,837
17,008 18,708
6,786
8,572
10,222 10,136
1,000
1,000
161
161
20,813 27,749
4,933
5,759
6,726
7,854
5,097
9,399
4,057
4,738
10,233 12,209
5,450
6,471
4,783
5,739
10,580 15,540
21,963 26,837
E: MOSL Estimates
Cash flow statement
Y/E March
OP/(Loss) before Tax
Depreciation
Others
Interest
Direct Taxes Paid
(Inc)/Dec in Wkg Cap
CF from Op. Activity
(Inc)/Dec in FA & CWIP
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax)
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
2014
5,406
646
0
-448
1,692
-1,199
2,750
-3,706
0
455
-3,251
0
-9
-7
-645
-662
-1,162
4,108
2,946
2015E
6,275
1,301
0
-291
2,090
-839
4,357
-4,970
0
300
-4,670
0
11
-9
-1,068
-1,066
-1,379
2,946
1,567
(INR Million)
2016E
7,968
1,626
0
-441
2,653
-658
5,842
-1,500
0
450
-1,050
0
104
-9
-1,356
-1,261
3,531
1,567
5,097
2017E
9,559
1,786
0
-641
3,183
-658
6,863
-1,700
0
650
-1,050
0
124
-9
-1,626
-1,511
4,302
5,097
9,399
6 August 2014
5

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Amara Raja
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Batteries
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Analyst ownership of the stock
AMARA RAJA BATTERIES LTD
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6