Amara Raja Batteries Sees Revenue Growth Of 28%

Amara Raja Batteries (ARB) announced a positive set of Q1FY14 numbers, wherein it saw strong growth in revenues and also maintained profitability. The share prices of ARB closed higher by over 7% today.

During the quarter, the company’s revenues came in at Rs 893.76 crore, a growth of 28.38% over that in Q1FY13. Its performance in the automotives business and its industrial business was robust, which boosted the overall revenues.

The company saw good momentum from its four-wheeler batteries business.  Although the performance of the automobile sector has been dismal and sales to OEMs (Original Equipment Manufacturers) have been subdued, aftermarket sales helped ARB maintain buoyancy in its overall sales.

Moreover, it saw a significant jump in the volumes of two-wheeler batteries. In Q1, it started supplying batteries to Honda for the latter’s Karnataka plant, which resulted in a good start to the company’s two-wheeler OEM business.

ARB’s trading in tubular batteries and home UPS systems also sustained its momentum despite unfavourable demand conditions. The company is now looking at enhancing capacity in both these product lines to meet future demand and garner more market share.

In its industrial business, the company saw robust growth as a result of replacement demand coming in from the telecom sector. While adverse macroeconomic conditions caused a weakness in OEM sales in the UPS business, replacement demand continued to be strong, thus supporting its overall performance.

Despite the strong demand in the telecom and UPS business, ARB could not fully capitalise on this because of inadequate capacity. However, the company is currently undergoing expansion, and is expected to commence supplies during the second half of the current fiscal.

Along with this stellar performance in volumes and revenues, ARB also maintained its profitability. In Q1FY14, the company’s EBITDA rose by 21.72% to Rs 145.4 crore and its net profit grew by 28.53% to Rs 97.8 crore.

On account of the strong demand for ARB’s products, the demand from the replacement market, entry into the two-wheeler business and capacity expansion, we have been bullish on the prospects of this company and continue to maintain our positive outlook on the stock.