Amara Raja Energy & Mobility Limited: Powering Ahead

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Amara came out with decent results with sales and EPS growing by 15%. It seems that their new energy business benefitted from lower lithium cell prices. This also brings into question future of lithium battery business, at a scale of 7-9 GWh, they expect to make 10-11% EBITDA margin at current cell prices of $80/GWh. They even went on to say that given the Chinese overcapacity, EV penetration has to reach 50% for the business to be lucrative. And market is most excited about this division! Concall notes below

FY24Q3

  • Lead acid battery : 13% YOY growth

    • 4-W volumes : OEM: 2%, after-market: 11%

    • 2-W volumes : OEM: 30%, after-market: 15%

    • Industrial volumes : growth of 6-7% (telecom: 8-9%, UPS: __%)

    • Home inverter volumes : no growth (only doing trading currently)

    • Exports : 24% YOY growth (4-W AGM batteries: 25% volume growth). Revenues are recognized after delivery. Catering to large retail chains

    • RM pricing : 200/kg (have not taken any price hike)

    • Trading revenue of 7%

    • 50% of volume is from after market

  • New energy business :

    • 148 cr. (vs 150 cr. in Q2 and 68 cr. in Q3FY23). 80% battery packs of 2-W and 3-W (Mahindra and Piaggio are main customers with 2-W being small)

    • Successfully powered an E-Bike using in-house NMC based 2170 cylindrical cells

    • Have started supplying battery pack for telecom (BSNL) and for industrial applications

    • Small cell towers have seen adoption of lithium packs

  • Tubular battery plant will be ready in March 2025

  • Plastic component acquisition from Mangal Industries is now complete, effective date will be 01.02.2024

  • Lithium cell : currently estimate 10-11% EBITDA margin (at current lithium prices) with 10-11% ROE at 7-9 GWh scale (@$80-90/GWh)

  • Given the Chinese overcapacity, EV penetration will have to reach 50% for business to be lucrative

  • FY24 capex: 250 cr. (lead) + 250-300 cr. (lead recycling + new energy). Recycling plant will commence in Q1FY25

  • FY25 capex: 600 cr. (mostly around new energy)

Disclosure: Invested (position size here, no transactions in last-30 days)

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