Shares of India's second-largest lead-acid battery manufacturer, Amara Raja Batteries, experienced one of the largest single-day increases in Friday's intra-day trading session, as shares zoomed by nearly 11.50% to hit a 7-month high after the company posted a 39.42% rise in its consolidated net profit to ₹201.22 crore in the second quarter ended September 30 on the back of high sales. Sequentially, the net profit was up by 52.42%.
The stock rose to an intra-day high of Rs. 579.90 during the trading session after initially opening at Rs. 549, up Rs. 29.25 from the previous closing price of Rs. 519.75. The stock saw a volume of 11.8 million, up 32.96 times from its average weekly volume of 359.1K on both the NSE and BSE.
On the technical charts, the stock is trading 7.49% above its 200-day moving average. On the other hand, the Relative Strength Index (RSI) of the stock stands at 62.7. (RSI oscillates between zero and 100. Traditionally, the RSI is considered overbought when above 70 and oversold when below 30. Besides, the stock is trading nearly 30% higher than its 52-week low of Rs. 438 and 20.13% lower than its 52-week high of Rs. 714.
On Thursday, the company posted a 19.27% YoY jump in revenue to ₹2,700.4 crore in Q2 compared to ₹2,264.15 crore in the year-ago period. Higher raw material prices pushed the company's overall expenses up. During the second quarter, total expenses jumped by 17.38% to ₹2,341.8 crore, compared with ₹1,995 crore in the corresponding period last year. However, sequentially, the expenses fell by 7.3%.
The company reported an operating profit of ₹358.7 crore for the September-ending quarter, an increase of 33.29% when compared to ₹269.1 crore in the corresponding quarter of the last fiscal. EBITDA margin came in at 13.28%, up by 139 basis points (bps) from the same quarter last year. The company announced an interim dividend of ₹2.90 per equity share with a record date of November 16, 2022.
On the fundamental side, the company has had zero debt for the last five years, Trendlyne data showed. Further, Amara Raja Batteries has a Return on Equity of 15.01% and a ROCE of 16% (5-year average) respectively. It has a price-to-earnings ratio of (16.92x) compared to the peer average of (43.07x).
The stock has been an underperformer in the last 1.5 years. After hitting a high of ₹1006.75 in January 2021, the stock started moving down, and it continued the same trend until June this year and has corrected by almost 55 per cent. However, the stock has seen its upward journey since mid of this year, and to date, it returned 28.75%.
Meanwhile, Amara Raja Batteries has launched several strategic initiatives to capitalise on rapidly emerging new opportunities to accelerate growth in lithium-ion and other new-age chemistries that are enabling rapid transformation in renewable energy, electric mobility, microgrids, and so on, said Geojit Financial in its equity research report.
Currently, the pilot project about the technology transfer from ISRO is progressing as per the schedule and has started supplying lithium battery packs and chargers for 3W applications. The company is planning to set up a Giga factory in the near to medium term for lithium batteries and related products and has targeted Rs. 1 billion in revenue by FY23, according to the report.
The promoters owned 28.1% of the shares in the company, while foreign portfolio investors and domestic institutional investors each owned 18.5% and 10%, respectively. Regular shareholders own a 43.5% stake.
An average of 17 analysts polled by MintGenie have a 'hold' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.