Synopsis: Amara Raja Energy & Mobility has entered lithium battery assembly and charger manufacturing, targeting sectors like two-wheelers, three-wheelers, and industrial applications. Its shares saw a 5% drop following Q2 results due to adjusted earnings forecasts, though the stock remains up 60% year-to-date. Despite strong sales growth, a cautious revenue forecast for FY25-27 has emerged, influenced by intense competition and lower margin assumptions.
Amara Raja reported a 6.3% increase in Q2 profits, reaching Rs. 240.7 crore, supported by an 11.6% rise in sales.
Its lithium battery assembly serves clients in key sectors like Piaggio, Mahindra, Omega SEKI, Indus Towers, and BSNL, reflecting its shift into electric vehicle (EV) components and infrastructure.
The company’s 10-year roadmap aims to grow lithium battery capacity to 16 GWh, targeting NMC and LFP chemistries to bolster competitiveness by 2026-28.
This ambitious capacity expansion underscores Amara Raja’s strategic pivot to EVs.
Nuvama Institutional’s revised target price of Rs. 1,580 considers a steady CAGR for lead-acid batteries (9% in revenue, 10% in EBITDA) and anticipates future growth from lithium-based ventures.
However, heightened competition has tempered growth expectations, especially after missing out on key Production-Linked Incentives (PLI).
In conclusion, Amara Raja Energy & Mobility's focus on lithium technology represents a substantial shift in its core strategy, aiming to tap into the growing EV and renewable energy market.
Despite short-term stock volatility and adjusted EBITDA expectations, its long-term vision includes robust growth in lithium battery capacity and potential market leadership in EV components, providing promising prospects for investors.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Please consult a financial advisor for tailored guidance before making investment decisions.
