Amara Raja Batteries posts 19.2% increase in net sales amidst difficult conditions

Moneylife Digital Team 14 May 2013

Despite difficulties in the automotive sector, the company has managed to scale new milestones as its market capitalisation crossed Rs5,000 crore

Amara Raja Batteries recorded net sales of Rs 801 crore for the quarter ended 31 March 2013 when compared to the Rs672 crore for the corresponding period last year, an increase of 19.20% year-on-year (y-o-y). Similarly, it recorded net profit of Rs59.6 crore versus the Rs58.3 crore for the three quarters ended March 2013. The lower realisation on profit was due to the provision of Rs7.55 crore set towards impairment in value of assets and additional depreciation of Rs5.15 crore.

Nomura has rated revised downwards its target price to Rs342 per share but still retained the ‘Buy’ call, in a recent note to clients. It also expects earnings to grow at 15% per annum till 2015 fiscal. It said in its report: “We estimate the company to deliver a 17% revenue compounded annual growth rate (CAGR) and 15% earnings CAGR over FY13-15F”. Furthermore, it said, “We believe that as the company increases its scale of operations, the multiples will improve.” Some of the concerns, according to Nomura, is the increase in price of lead and slowdown in automotive growth.

Commenting on the full year performance, K Suresh, chief financial officer, said, “The company continues to enjoy debt-free status and has free cash of over Rs3.50 billion at the end of the financial year. The year under review saw the company’s market capitalisation touching Rs5,000 crore with considerable improvement in PE ratio reflecting growing investor confidence. Various capacity enhancement projects, undertaken during the year, are progressing as per schedule and are well within the approved costs. Continuing debt free status and sound credit rating of the company will help us to leverage as and when required, at minimal cost.

The Moneylife database reveals that the company’s market capitalisation is quoting at just 9.97 times operating profit while its return on equity and return on capital employed stood at an impressive 35% and 34% respectively.

Moneylife had written about the company in its 3 May 2012 issue and had recommended the stock at Rs157.5. Currently its share price is trading at over Rs264.60 on the Bombay Stock Exchange (BSE). More can be read over here:

http://www.moneylife.in/article/amara-raja-batteries-evergreen/25483.html.

During the quarter, it continued to invest in its greenfield capacity expansion, from 1.8 million to 3.6 million per annum, and the expansion is progressing as per schedule. The company has committed to invest about Rs760 crore for various capacity expansion projects and is looking into possible growth opportunities.

The board of directors have recommended a dividend of Rs2.52 per share, of face value Re1 each, and in line with the declared policy of distributing up to 15% profits, subject to approval of shareholders.

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