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Amara Raja charges ahead as Exide lags

Wednesday, 7 November 2012 - 8:19am IST | Place: Mumbai | Agency: DNA
Amara Raja Batteries continues to outperform its nearest rival Exide Industries in terms of operating performance and gain market share.

Amara Raja Batteries continues to outperform its nearest rival Exide Industries in terms of operating performance and gain market share.

The second-largest battery manufacturer reported net sales of `714.8 crore in the September quarter, a strong 27.6% growth over the year-ago period on the back of strong momentum in its after-market automotive battery business and moderate volume growth in industrial battery segment.

As a result, the company was able to gain market share both in the replacement and OEM automotive segments.
The quarterly net profit, too, grew 35% year on year to `70.1 crore on the back of strong sales growth and stable operating margins that stood at
16.5%.

Operating margins have been in the range of 15-17% for the last four quarters.
With the strong set of numbers, Amara Raja has beaten analyst estimates.

This is in sharp contrast to Exide’s performance, which disappointed the market analysts in the second quarter.
Exide had reported operating margin of 12.4%, despite a 29.7% growth in revenues, which led to its net profit declining
20.9% on a quarter on quarter basis.

In fact, Exide’s operating margins have been under pressures since the second quarter of last fiscal and have remained in 12-15% range.

The company’s strong set of numbers have made analysts hopeful that the company may close in on valuation gap further with the automotive batter leader Exide.

“With the sixth consecutive quarter of outperformance of Amara Raja over Exide, we believe the valuation discount between the two could narrow. We expect the historical valuation discount of Amara Raja of around 30% to Exide to narrow, given the consistent performance by the company,” wrote Surjit Arora, analyst at Prabhudas Liladher.

Radhika Merwin, analyst with Proactive Universal Group, said the gap in valuations will continue to merge with strong market share gains by Amara Raja and visibly better earnings growth over the past years.

“Amara Raja has consistently performed on volumes and operational fronts. The stock has delivered close to 120% return over the last year, and has re-rated from 9x multiples to 11x one year forward earnings, in line with our earlier thesis. We are revising our estimates upwards by 7% for fiscal 2013 and 13% for fiscal 2014 on account of margin outperformance,” she wrote.
 


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