Amara Raja: Analysts keep Buy on strong LAB, margin gains and lithium push

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Analysts are maintaining a bullish view on battery maker Amara Raja Energy & Mobility, on the back of resilience in its core lead-acid battery (LAB) business, improving margin trajectory, and long-term growth opportunities from its lithium cell venture. 

 

The brokerage retained a ‘Buy’ rating on Amara Raja Energy and Mobility stock, with a target price of ₹1,120, valuing the LAB business at 15x Sep-27E earnings per share (EPS), lithium assets at 1x price-to-book (P/B) (₹169/share), and investments at ₹42/share.

 

“Retain ‘Buy’ with a target price (TP) of ₹1,120 based on 15x Sep-27E EPS for LAB, ₹169/share for lithium at 1x P/B, and ₹42/share for investments,” said Raghunandhan N, Manav Shah and Rahul Kumar of Nuvama Instituional Equities, in a note dated October 1.

 

At a recent analyst meeting with chief financial officer Delli Babu and battery pack business head Dwaraka B, management outlined its growth roadmap across traditional and new energy segments.

Demand, margin outlook

 

For FY26, Amara Raja guided aftermarket replacement demand growth at 6-7 per cent for four-wheelers and 10-11 per cent for two-wheelers, driven by a steady replacement cycle and rising vehicle base. Importantly, the company expects operating margins to strengthen meaningfully – from 11.5 per cent in Q1FY26 to 13 per cent in Q4FY26E and further to 14 per cent in FY27E.  ALSO READ | Tata Motors stock may face near-term volatility post demerger: Analysts 

The margin expansion is expected on the back of lower trading share as the tubular plant resumes, resolution of power cost pressures, and benefits from the new recycling facility. Analysts noted, however, that near-term margins remain vulnerable due to elevated antimony prices and currency depreciation.

Lead-acid business to outperform

 

Despite growing electrification trends, management reiterated that the LAB business remains insulated from disruption for the next 15-20 years, especially in mobility. The Indian LAB market, pegged at $4.6 billion in FY25, is forecast to expand to $5.8 billion by FY30 at a 5 per cent compound annual growth rate (CAGR). The company aims to outperform the sector by 3-5 per cent through market share gains and higher exports.

 

Currently, Amara Raja commands 27-28 per cent share in 2W original equipment manufacturers (OEMs), ~36 per cent in four-wheeler (4W) OEMs, and over 35 per cent in the aftermarket across both two- and four-wheelers. Capacity stands at ~40 million 2W units and ~20 million passenger vehicle (PV) units, with scope to debottleneck up to 46 million and 25 million, respectively.  ALSO READ | GST 2.0, rural recovery may boost prospects for vehicle financiers

Lithium foray, capex plans

 

On the new energy front, the company has deferred Phase 1 of its lithium-ion cell plant to H2FY27E from the earlier FY26 target. The first phase will have 1GWh capacity for NMC cells, scalable to 2GWh, with eventual breakeven expected at 2GWh and profitability at 4GWh. Capex is estimated at $50 million per GWh with asset turnover of 1x.

 

For FY26, Amara Raja has planned ₹1,200 crore in capex, split into ₹800 crore for lithium and ₹400 crore for LAB. By FY27, total investments in new energy are expected to reach ₹2,500 crore, with ₹1,200 crore already infused.

 

With a robust replacement demand cycle, margin expansion levers, resilient LAB business, and a calibrated entry into lithium, analysts believe Amara Raja is well-placed for medium- to long-term growth.