Mobility solutions provider Amara Raja Energy & Mobility saw its share price surge over 5% to hit a new all-time high of Rs. 811 on Wednesday. The sharp rise came on the back of the company’s strong Q2 FY23 results announced yesterday.
Why Amara Raja Stock Is Surging Today
The sharp surge in Amara Raja Energy & Mobility’s shares comes on the back of the company’s strong Q2 performance driven by revenue growth across business verticals.
Analysts are particularly impressed by the expansion in EBITDA margin to 9.7% in Q2 compared to 8.4% in the same quarter last fiscal. This indicates the company’s improving profitability due to operating leverage and cost optimization efforts.
The 20% Y-o-Y jump in EBITDA is also seen as a positive sign of the company’s growth prospects. Meanwhile, the 18% rise in net profit reflects Amara Raja’s strong bottomline growth.
Amara Raja Poised For Growth Across Verticals
Amara Raja Energy & Mobility is engaged in manufacturing lead-acid batteries for both industrial and automotive applications. The company is also focused on new age lithium-ion batteries and energy solutions.
In Q2, the company saw increased momentum across its industrial and automotive battery businesses. This was driven by post-pandemic economic revival and resurgence in demand from OEMs.
Meanwhile, Amara Raja’s lithium-ion battery vertical is also gaining traction. The company recently opened one of India’s largest lithium-ion battery manufacturing facilities in Telangana.
With electric mobility adoption set to rise exponentially in India, Amara Raja is well positioned to capitalize on the emerging opportunity. Its investments in lithium-ion battery tech and R&D capabilities place it among the frontrunners in this space.
Valuations Remain Attractive Despite Run-Up
Despite the sharp run-up in Amara Raja’s stock price, valuations remain attractive for long-term investors. The stock currently trades at a P/E ratio of 13.96 compared to the industry average of 26.02.
Analysts are overwhelmingly positive on the stock with 13 analysts recommending a ‘Buy’ and only 1 analyst suggesting a ‘Sell’. The company also has robust fundamentals with a healthy balance sheet, strong return ratios and improving margins.
The recent surge indicates the market’s confidence in Amara Raja’s growth prospects across both traditional lead-acid and new lithium-ion battery verticals. With the company firing on all cylinders, the stock remains a solid bet for investors with a long-term horizon.
Outlook Going Forward
Going forward, Amara Raja Energy & Mobility seems poised for robust growth driven by:
- Increasing demand for industrial and automotive lead-acid batteries as economic activity accelerates
- Opportunity in fast-growing lithium-ion battery segment for electric vehicles
- Ramp up of new lithium-ion battery production facilities
- Margin expansion due to operating leverage and cost optimization
- Innovation and R&D investments to capitalize on emerging opportunities
Thus, the company appears to be in a sweet spot currently to deliver healthy growth in the coming years. While some correction can be expected after the sharp surge, Amara Raja stock remains a good buy for long-term investors.
