Amara Raja Q2 Results Review - Earnings Beat Led By Lower Raw Material Costs: Motilal Oswal

Motilal Oswal Report

Amara Raja Batteries Ltd. Q2 FY23 earnings were led by softening of raw material costs coupled with volume growth across segments. The recent moderation in lead prices will aid margin recovery. Volumes should see an upward trajectory in both automotive and industrial segments.

Revenue/Ebitda/adjusted profit after tax grew 19%/34%/40% YoY to Rs 27 billion/Rs 3.6 billion/Rs 2 billion in Q2 FY23 (versus our estimate Rs 25.4 billion/Rs 2.65 billion/Rs 1.3 billion).

H1 FY23 revenues/ Ebitda/ adjusted profit after tax grew 28%/20%/24.5% YoY.

Amara Raja's gross margins improved 60 bps YoY (390 bps QoQ) at 30.5% (versus our estimate of 27.5%), led by a 9% YoY decline (down 6.5% QoQ) in spot lead prices.

Price hikes (2-2.5% QoQ) and soft lead prices boosted gross margins.  Higher gross margins led to a 150 bps YoY improvement in Ebitda margin (up 340 bps QoQ) to 13.3% (versus estimate 10.5%).

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