Amara Raja - Q1FY22 - MOSt
Amara Raja - Q1FY22 - MOSt
Amara Raja - Q1FY22 - MOSt
Amara Raja
Estimate changes
TP change
CMP: INR729 TP: INR820(+12% ) Neutral
Rating change Strong revenue outperformance leads to overall beat
RM cost inflation keeps margin under pressure
Motilal Oswal values your support in the
Asiamoney Brokers Poll 2021 for India AMRJ’s 1QFY22 performance was led by strong revenue growth across
Research, Sales, Corporate Access and segments. Drivers for demand are in place, but rising RM prices (lead,
Trading team. We request your ballot.
plastic, sheet metal, and copper) could restrict performance in the near
term. AMRJ is geared up for the next phase of transformation in the Lead
Acid Battery segment. It is also foraying into the New Energy business:
lithium ion/battery pack, EV charging products, energy storage solutions,
Bloomberg AMRJ IN
etc. We expect this to be an important driver for the stock
Equity Shares (m) 171 We cut our FY22E/FY23E EPS estimate by 13%/5% to account for higher
M.Cap.(INRb)/(USDb) 124.6 / 1.7 RM cost. We maintain our Neutral rating with a TP of INR820 per share
52-Week Range (INR) 1025 / 693 (18x Mar’23E EPS).
1, 6, 12 Rel. Per (%) -6/-34/-47
12M Avg Val (INR M) 1018 Strong growth across segments, but cost inflation hurts margin
Revenue/EBITDA/PAT fell 10%/21%/35% QoQ (+64%/+64%/+98% YoY) to
Financials & Valuations (INR b) INR18.9b/INR2.5b/INR1.24b in 1QFY22. Revenue growth was driven by
Y/E March 2021 2022E 2023E outperformance across segments.
Sales 71.5 85.6 96.8 Gross margin declined by 150bp QoQ (-240bp YoY) to 31.1% (est. 33%),
EBITDA 11.2 11.5 14.2
despite higher contribution from Replacement on a QoQ basis, due to RM
Adj. PAT 6.5 6.2 7.8
EPS (INR) 37.9 36.2 45.8 cost inflation and higher trading mix, which resulted in lower gross
EPS Gr. (%) -2.1 -4.5 26.5 margin. Lead prices rose 7-8% QoQ in 1QFY22.
BV/Sh. (INR) 247 270 301 Higher staff costs, partially offset by lower other expenses, led to a 180bp
Ratios
QoQ EBITDA margin decline (flat YoY) to 13.2% (est. 13.6%). EBITDA
RoE (%) 16.5 14.0 16.0
RoCE (%) 16.4 14.0 16.0 declined by 21% QoQ (+64% YoY) to INR2.5b (est. INR2b).
Payout (%) 29.0 34.5 32.8 Higher depreciation, combined with lower other income, led to an
Valuations adjusted PAT of INR1.24b (est. INR1b), a decline of 35% QoQ (+98% YoY).
P/E (x) 19.3 20.2 15.9
P/BV (x) 3.0 2.7 2.4 Highlights from the management interaction
Div. Yield (%) 1.5 1.7 2.1 Despite the lockdowns, the Auto segment saw growth in both
FCF yield (%) 1.8 4.2 3.5
OEM/Aftermarket as well as exports. In Industrials, Telecom and
Commercial UPS segments registered strong YoY growth.
Shareholding pattern (%)
As On
All segments fell 5-6% QoQ, except Telecom (flat QoQ). On a YoY basis,
Jun-21 Mar-21 Jun-20
Promoter 28.1 28.1 28.1
the 4W Aftermarket/2W segment grew 30-40%/~45%.
DII 15.2 12.6 13.7 Aftermarket sales are growing at 8-9%/12-13% in the 4W/2W space in
FII 22.1 21.3 19.0 2QFY22 so far.
Others 34.6 38.0 39.2 It took a price hike of ~1.5% each in Apr’21, Jul’21, and Aug’21 to offset
FII Includes depository receipts RM cost inflation. Lead cost rose 7-8% YoY and 5-6% QoQ, and spot rates
are almost 15-18% higher than its 1QFY22 average.
Capex for FY22 is estimated at INR4-4.5b and is entirely for lead acid
batteries. It is yet to finalize capex on lithium ion cell manufacturing.
Valuation and view
The stock trades at valuations of 20.2x/15.9x FY22E/FY23E EPS. We
maintain our Neutral rating with a TP of INR820/share (18x Mar’23E EPS,
in line with its 10-year LPA) as expectations of better earnings growth
balances out an increasing threat of lithium chemistry to both the Auto
and Industrial business.
Jinesh Gandhi – Research Analyst ([email protected])
Research Analyst: Vipul Agrawal ([email protected]) / Aniket Desai ([email protected])
Investors are advised to refer through important disclosures made at the last page of the Research Report.
3 September 2019 1
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Amara Raja
Quarterly performance
(INR m) FY21 FY22 FY21 FY22E FY22E
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE
Net Sales 11,510 19,358 19,601 21,027 18,859 21,488 21,953 23,291 71,497 85,590 14,964
YoY Change (%) -36.6 14.2 12.1 33.0 63.8 11.0 12.0 10.8 4.5 19.7 30.0
EBITDA 1,524 3,404 3,064 3,165 2,499 2,747 2,708 3,516 11,159 11,469 2,042
Margin (%) 13.2 17.6 15.6 15.1 13.2 12.8 12.3 15.1 15.6 13.4 13.6
Depreciation 748 782 791 871 963 970 975 981 3,192 3,889 880
Interest 27 25 26 28 32 27 28 14 105 100 20
Other Income 88 113 352 321 166 200 220 274 874 860 220
PBT after EO 837 2,710 2,599 2,588 1,670 1,950 1,925 2,795 8,736 8,340 1,362
Tax Rate (%) 25.1 25.6 25.7 26.8 25.8 25.9 25.9 26.0 25.9 25.9 25.9
Adj. PAT 627 2,015 1,932 1,895 1,239 1,445 1,426 2,069 6,470 6,180 1,009
YoY Change (%) -55.5 -8.0 17.5 38.7 97.7 -28.3 -26.2 9.2 -2.1 -4.5 61.1
Key exhibits
Exhibit 1: Trend in revenue and revenue growth Exhibit 2: Trend in gross margin
Net sales (INR m) Growth YoY (%) Gross margin (%)
63.8
11,510
33.0
22.8 14.2 12.1
18.8 9.1
-0.9 2.0 -3.3 3.1 0.9
-36.6
15,814
18,859
17,787
17,531
16,947
15,667
18,150
17,478
19,358
19,601
21,027
2QFY20 16,953
33.5
31.1
28.5
30.9
32.8
34.8
32.4
35.9
35.5
36.3
34.7
33.9
32.6
1QFY22
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY21
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
2QFY21
3QFY21
4QFY21
1QFY22
Source: Company, MOFSL Source: Company, MOFSL
Exhibit 3: Trend in EBITDA and EBITDA margin Exhibit 4: PAT and PAT growth trend
PAT (INR m) Growth YoY (%)
EBITDA EBITDA (%)
98
17.2 16.2 17.6 82
14.9 15.5 15.4 15.4 15.6 15.1
12.4 13.5 13.2 13.2 26 14 39
13 25 17
-3 9
-5 -8
1,239
-56
2,203
2,366
2,528
2,421
2,792
2,923
2,840
2,432
1,524
3,404
3,064
3,165
2,499
1,130
1,202
1,309
1,193
1,409
2,189
1,644
1,366
2,015
1,932
1,895
627
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
15 August 2021 2
Amara Raja
147
156
175
178
100
3QFY20
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
4QFY20
1QFY21
2QFY21
4QFY21
1QFY22
2QFY22QTD
Spot
3QFY21
Source: Bloomberg, MOFSL
15 August 2021 3
Amara Raja
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).
Valuations fair, maintain Neutral: We cut our FY22E/FY23E EPS estimate by
13%/5% to account for the higher RM cost. We expect value migration from
unorganized to organized players such as EXID and AMRJ in the Replacement
segment, driven by tax reforms such as GST and lower corporate tax rates.
Healthy Replacement demand would lead to better capacity utilization and
margin. However, its current margin performance may not sustain in FY22 as
volume recovery with OEMs would result in a mean reversion of mix and
margin. With the exit of Johnson Controls, promoters are expected to play a
pivotal role in its long-term strategy as well as technology sourcing. The stock
trades at valuations of 20.2x/15.9x FY22E/FY23E EPS. We maintain our Neutral
rating with a TP of INR820/share (18x Mar’23E EPS, in line with its 10-year LPA)
as valuations fairly balance out good earnings growth as well as the threat of
lithium technology to the Auto and Industrial business.
May-15
Nov-17
May-20
Aug-11
Aug-16
Aug-21
Feb-14
Feb-19
Nov-12
Nov-17
Aug-11
Aug-16
Aug-21
Feb-14
May-15
Feb-19
May-20
15 August 2021 4
Amara Raja
Story in charts
Exhibit 9: Significant addition in 2W capacity Exhibit 10: Trend in revenue
4W (mn units)
2W (mn units) Net sales (INR m) Growth (%)
20.0 20.0 19.7
71,497
68,395
17.0 17.0
14.5 14.5 15.1
14.0 14.0 14.0 13.1
12.5 12.5 12.5 12.1
10.5
4.5
53,172
60,592
67,931
85,590
96,809
0.7
FY18 FY19 FY20 FY21 FY22E FY23E FY17 FY18 FY19 FY20 FY21 FY22E FY23E
Exhibit 11: EBITDA and EBITDA margin trend Exhibit 12: Earnings and growth trend
EBITDA (INR m) EBITDA margins (%) EPS Growth (%)
36.7 45.8
11,469
14,182
(4.5)
8,499
8,832
9,518
38.7
FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY17 FY18 FY19 FY20 FY21 FY22E FY23E
Exhibit 13: Trend in CFO, capex, and FCF Exhibit 14: Trend in return ratios
CFO Capex FCF RoCE (%) RoE (%)
12.1 20.3
9.7 10.3 18.9
7.4 17.0 16.5
5.8 5.7 5.1 5.2 4.3 15.4 16.0
3.5 2.3 19.4 18.6 14.0
1.5 0.4 16.3 16.4 16.0
14.9 14.0
-0.3
-4.3 -3.9 -5.3 -5.1 -4.5
-7.0 -6.0
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
15 August 2021 5
Amara Raja
15 August 2021 6
Amara Raja
15 August 2021 7
Amara Raja
NOTES
15 August 2021 8
Amara Raja
15 August 2021 9
Amara Raja
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15 August 2021 10