Amara Raja Q1 Results Review - Weak Mix, Rising Raw Material Costs Dent Profitability: Motilal Oswal

Motilal Oswal Report

Amara Raja Batteries Ltd.’s Q1 FY25 financials were weak, with Ebitda margin contracting ~90 basis points QoQ to 13.7% (estimate: 14.8%). The margin contraction was due to a shift in the product mix, with traded goods rising to 23% of revenue (versus ~12% in Q4 FY24), along with some increase in raw material costs.

On a positive note, the quarter saw healthy volume growth in most segments.

We cut FY25E/FY26E earnings per share by 10%/6% to factor in the increase in commodity prices. While market seems to be upbeat about Amara Raja’s lithium ion foray, we remain circumspect of the returns from the business. The stock at ~28 times/24 times FY25/26E EPS appears fairly valued. We, hence, maintain Neutral rating with a revised target price of Rs 1,390 (based on 20 times June-26E EPS).

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