Amara Raja came with flattish results, with margins reviving YOY but being impacted QoQ due to higher traded sales of tubular batteries. They are confident of doing 750 cr. sales in new energy business this year, which will be a 3x scaleup over last year. Lithium ion validation plant will come onstream at end of FY25, and the 2GWh capacity in Fy26. Interestingly, at $100/GWh cell costs, they can do revenues of upto 3000 cr. which translates into asset turns of ~2x (investment of 1500 cr.). Given this space is evolving, its hard to estimate IRRs on the project, but directionally it seems to be going the right way. Concall notes below.
FY24Q1
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Lead acid battery: 4% YOY growth
o 70% contribution from 2-W, 4-W and inverters; 30% from industrial segment
o 4-W grew by 5%; after-market grew at 7-8%
o 2-W grew by 9%; both OEM and after-market grew at low double digit. Have seen significant market share gain in after market
o Inverter and other applications declined by (-20%) due to poor season and fire in tubular factory. This business was replaced by trading revenue (15-16%) and has impacted margins. Have maintained market share, but has failed to gain market share due to absence of self-manufacturing
o Export was muted partly due anti-dumping duty in Middle East markets. Expect export growth to recover in coming quarters from Western markets
o Industrial segment grew 15% YOY, telecom even higher - Capacity utilization
o Automotive: 74-75% (2-W: 80%)
o Industrial: 95-97% - New energy business: 107 cr. Supplying battery packs to 3-W (Piaggio is main customer) and battery chargers to 3-W OEMs and other stationary applications (Piaggio and M&M are main customers). Getting ready to launch battery packs for 2-W and certain high voltage applications. Also supplying lithium battery packs to telecom customers
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Lithium ion plant:
o Customer qualification plant will start in end of FY25 and GWh NMC line will deliver production in FY26. R&D lab + customer qualification plant + GWh line will cost 1500 cr. (200-300 cr. to be incurred in FY24)
o Depending on cell price (@$100/GWh) and 2GWh, fixed asset turns come between 1.4-1.5x
o Revenue contribution from 2GHh plant can be around 3000 cr. at full utilization (with 10-12% EBITDA margin) - Insurance cost increase (6-7 cr.) has also impacted margins
- Reduced power costs (10-15 cr.) due to solar plant coming onstream. Currently catering to 20% of power requirements. Total investment behind the solar power plant and rooftop facility will be 300 cr. (59.1MW currently + 7.5MW to be done in FY24)
- For any greenfield expansion, optimum size of plant will be 7-7.5mn batteries. If they put up a facility, it will be at a different location and the capacity will be added in phases
- Tubular plant will be reinstated in 18-20 months
- At lead prices of 150-170/kg, can do 15% EBITDA margin
Disclosure: Invested (position size here, bought shares in last-30 days)