Amara Raja Batteries shrugs off Covid-19 lockdown section; poised for sturdy outlook – BusinessLine

Shrugging off the Covid-19 pandemic-induced lockdown, Amara Raja Batteries Limited has notched up a strong second quarter ended September 2020 with its plants functioning at near 100 per cent capacity utilisation.

The performance during the quarter was driven by the demand rebound across all key sectors of the business — two and four-wheelers, both from original equipment manufacturers (OEMs) and aftermarket, industrial, telecom (with the need for 100 per cent data uptime), and UPS segments, particularly due to work from home.

With vehicle production witnessing strong rebound over the past three months, the upcoming festive season is also likely to augur well for the company.

Also read: Amara Raja Batteries nets ₹201 crore in Q2, revenue up at ₹1,936 crore

According to the company, due to Covid-19, personal mobility preferences saw increased purchase of two-wheeler and entry-level passenger vehicles. Sales in the aftermarket also resulted in an uptick due to pent up demand. Significantly, exports of automotive batteries in the Indian Ocean rim and industrial batteries also saw an upsurge as markets across the geographies opened up.

After announcement of results recently, S Vijayanand, CEO, Amara Raja Batteries, said, “We have been operating all our manufacturing facilities near 100 per cent capacity utilisation to keep pace with the demand ramp up. There have been some delays in the capacity expansion programs in the last couple of quarters due to Covid-19 restrictions and we are working in a focused manner to complete these projects which should help us to debottleneck supply constraints in the coming months.”

According to Emkay Global, “Robust replacement demand, coupled with a pick-up in OEM/industrial segments, is expected to support revenue performance going ahead. AMRJ’s market share gains are also expected to continue.”

Also read: Amara Raja, Blaze Automation join hands to manufacture IoT devices

Second quarter (Q2) revenue grew 14 per cent year-on-year (yoy) to ₹1,936 crore (₹1,695 crore) and came in above estimates on robust two-wheeler/four-wheeler replacement growth of 11 per cent/16 per cent and market share gains in two-wheeler OEM segment. The company’s market share with Hero MotoCorp and TVS Motors saw an increase. In Q2, it was able to retain the benefits of lower lead prices.

According to Anand Rathi Q2 report analysis, “Amara Raja’s market-share gains in two-wheelers and new business opportunities in telecom would go a long way in building a strong position in its business. We continue to expect market-share gains in the ensuing quarters in 2W batteries.”

Strong growth in OEM, replacement, inverters

The company registered 35 per cent yoy growth in inverters and 40 per cent in two-wheeler batteries, driven by 110 per cent growth in OEMs and 15 per cent in the replacement market. Four-wheeler batteries registered 4 per cent growth on 11 per cent growth in the replacement business. The capacity constraints faced by others in the market are benefitting Amara.

The company’s entry into tower-monitoring systems augurs well for a new revenue stream for its industrial business. It expects revenue to grow 16 per cent in FY22 and margin to expand to 16.7 per cent.

Shares of Amara Raja closed at ₹782.45, up ₹7.35 (+0.95 per cent) on the BSE on Tuesday.

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