Amara Raja Batteries soars 10% amid heavy volumes on strong Q2 results

The company's net profit jumped 43 per cent YoY, and it witnessed robust demand in the automotive sector from the aftermarket as well as OEM segments.

Shares of Amara Raja Batteries soared 10 per cent to Rs 571.75 on the BSE in Friday’s intra-day trade on the back of heavy volumes after the company reported strong September quarter (Q2FY23) results with profit before tax (PBT) up 43 per cent at Rs 276.52 crore over the previous year quarter. On a sequential basis, PBT rose 56 per cent.

At 09:33 AM, the stock traded 9.7 per cent higher at Rs 570.35, as compared to 0.10 per cent rise in the S&P BSE Sensex. The average trading volumes at the counter surged over 10-fold today. A combined 5.7 million shares changed hands on the NSE and BSE.

The company’s revenue from operations during the quarter jumped 19 per cent year-on-year (YoY) and 3 per cent on quarter-on-quarter (QoQ) to Rs 2,699 crore. Earnings before interest, taxes, depreciation, and amortization (EBITDA) in Q2FY23 came in at Rs 360 crore with corresponding EBITDA margins at 13.3 per cent, up 330 bps QoQ.

The company has also declared an interim dividend of Rs 2.9 per share with record date on November 16, 2022.

Amara Raja Batteries said that the company witnessed robust demand in the automotive sector from the aftermarket as well as OEM segments. Exports showed very healthy growth in Middle East and South East Asian markets. Industrial battery volumes continued their upswing, especially in the telecom segment driven by 5G rollout preparations in India, the company said. The management is optimistic that the economic drivers will remain stable in the near future.

As part of the Energy & Mobility strategy announced by the company last year, Amara Raja has been at the forefront of establishing the domestic manufacturing eco-system for advanced energy storage technologies, including Li ion cells and packs for E-mobility and stationery energy storage applications.

To further strengthen its efforts in this space the company announced the incorporation of a wholly-owned subsidiary that will set up a multi-gigawatt hour lithium-ion cell manufacturing facility.

Amara Raja Batteries’ margin expansion for the quarter was led by decline in raw material costs, which were down 390 bps QoQ amid 10 per cent decline in lead prices in rupee terms over the last two quarters, ICICI Securities said in a note.

The company also announced formation of wholly-owned subsidiary to undertake the business of manufacturing LiOn batteries. However, it is yet to announce meaningful capital commitment towards the same, which makes us maintain a neutral stance on the stock, the brokerage firm said.

Technical View

Bias: Positive

Target: Rs 674

Support: Rs 552; Rs 542

The stock was trading with a positive bias on the short-to-medium term chart, and with today's sharp gap-up the stock has also conquered its long-term (200-day) moving average.

Further, the stock is also seen trading above the higher-end of the Bollinger Band both on the daily and the weekly charts, thus indicating positive bias with strong support expected around Rs 552 and Rs 542 levels.

On the upside, the stock seems on course to test 100-WMA (Weekkly Moving Average) placed at Rs 674 level.

(With inputs from Rex Cano)