Amara Raja Batteries
AMARA RAJA BATTERIES............ An energized stock
Amara Raja Batteries is engaged in manufacturing of automotive and industrial battery with present capacity of 4 million pieces per annum.
The company is implementing Rs.265 crore expansion at Tirupati, to be completed in three years, for the manufacture of two wheeler, telecom and small VRLA batteries, with total capacity of about 6 million pieces.
Telecom battery market is showing a growth of 40% plus, annually, in view of huge addition of mobile subscribers. Also, due to average life of about 24 months of mobile telephone batteries, the telecom market has now been witnessing huge replacement demand of batteries for the handsets acquired about 23 years back. This demand would continue to rise in the coming time.
The company has now focused on two wheeler battery market also, which is quite huge in OEM and replacement segment.
Of the total raw-material costs, 70% is cost of lead. The price of lead now has softened to about US $ 2,400 PMT after having peaked to US $ 3,950 PMT about six months ago. Also, due to strengthening rupee, the landed cost of lead is also lower, which has been helping the company to post improved financial performance.
For FY 07, the total income of the company was Rs.606 crores, with operating profit of Rs.91.30 crores, profit before tax of Rs.71.20 crores and net profit of Rs.47.04 crores, resulting in an EPS of Rs.41.31 (face value Rs.10) for the year.
The company had posted CAGR of over 50% in topline and close to 220% in bottomline over the last three years.
The management of the company, are confident to post CAGR of atleast 35% in topline and bottomline for the next three years, upto FY 10.
For QI FY 08, the total income was at Rs.217 crores, operating profit of Rs.34.86 crores, PBT of Rs.27.46 crores and PAT of Rs.17.61 crores, resulting into an EPS of Rs.3.15 (face of Rs.2).
For Q2 of FY 08, the total income was at Rs.260 crores with operating profit of Rs.40.04 crores, PBT of Rs.31.46 crores and PAT of Rs.20.62 crores, giving an EPS of Rs.3.62 (face value Rs.2).
It may be seen from first two quarter results, that the company has been posting a quarterly growth of close to 15% on topline and bottomline, quarter on quarter.
FY 08 is likely to have a topline of close to Rs.1,100 crores, operating profit of Rs.170 crores, PBT of Rs.134 crores and PAT of Rs.90 crores, giving an EPS of close to Rs.15. This translates into a growth of over 80% in topline and about 115% in bottomline, thus maintaining the tempo of growth momentum.
The present paid-up equity of the company is very tiny, at Rs.11.39 crores (face value of Rs.2) of which, 52% is held by the promoters, 13.63% by Mutual Funds, Banks, Insurance Companies and FII, while balance 34.37% by the public. Of promoters equity, 26% is held by Indian promoters, Galla Family and 26% by the foreign promoter, Johnson Controls.
The present net worth of the company is close to Rs.250 crores, thus giving a respectable book value of Rs.43 per share, as on 31st March 07. The present debt of Rs.140 crores, is largely to finance net current assets, which are close to Rs.220 crores. This makes the company debt free. Future capex of Rs.260 crores are also not going to increase any sizeable debt burden, as major portion would get mobilized from internal accruals. A sound and stable financial planning and management.
On tiny equity of Rs.11.40 crores, turnover of over Rs.1,000 crores and cash profit of close to Rs.100 crores, reflects excellent financial ratios. In FY 09, the expansion would further improve these ratios and working. The part of increase in capacity has gone on stream, which would keep happening at an interval of every six months.
The share is presently ruling at Rs.215, which discounts FY 08, EPS by about 14 times and FY 09 earnings by less than 10 times. This enable the share to give an annualized return of close to 40%, over the next three years, from its present price.
A safe, sound and consistent stock, for medium to long term, at Rs.199.