Amara Raja Batteries demonstrated fast growth over the last few years. Will the growth continue?

04-06-2014 • About Amara Raja Batteries ($AMARAJABAT) • By InTwits

Pay attention to Amara Raja Batteries as a growth stock. It showed noticeble revenue performance in the last years among with attractive profitability and financial model.

Growth story

Amara Raja Batteries showed fast growth in the last financial year. Amara Raja Batteries's revenue surged on 16.1% in FY2014. At the same time Amara Raja Batteries well managed its profitability and also showed EBITDA growth of 5.16% for the same period.

If we look for the longer period Amara Raja Batteries showed fast revenue growth of 25.0% from FY2011 to FY2014 annually. EBITDA surged on 22.7% from FY2011 to FY2014 annually.

Amara Raja Batteries ($AMARAJABAT) financials for the last 5 years

mln. INR	FY2010	FY2011	FY2012	FY2013	FY2014
Revenue	53,246	17,599	23,633	29,574	34,345
Revenue growth, %		-66.9%	34.3%	25.1%	16.1%
SG&A, %	15.9%
EBITDA	2,951	2,641	3,522	4,638	4,877
EBITDA growth, %		-10.5%	33.3%	31.7%	5.2%
EBITDA margin, %	5.54%	15.0%	14.9%	15.7%	14.2%
Net Income	1,670	1,481	2,151	2,867	2,752
Net Income margin, %	3.14%	8.41%	9.10%	9.69%	8.01%

CAPEX	685	519	873	746	3,727
CAPEX/Revenue, %	1.29%	2.95%	3.70%	2.52%	10.9%
Debt	273	901	855	881	857
Cash	454	123	533	443	2,929
Net Debt/EBITDA	-0.1x	0.3x	0.1x	0.1x	-0.4x

ROIC, %	39.1%	30.5%	32.1%	34.5%	30.3%
ROE, %	35.2%	24.9%	29.3%	30.4%	22.7%

Profitability and return on investment

Despite revenue growth EBITDA margin declined slightly from 15.7% in FY2013 to 14.2% in FY2014. In the longer period the company showed decline of 0.800 pp from 15% in FY2011 to 14.2% in FY2014.

Amara Raja Batteries shows attractive ROIC at 30.3% for the last 12 months which assumes stable development model. During the last three years it decreased slightly - it was 30.5% in FY2011. Average ROIC for the last three years was 32.3%.

The company showed big decline in Net Income margin of 1.70 pp from 9.70% to 8% in FY2014. In the last 3 years the company showed small Net Income margin decline of 0.400 pp from 8.40% in FY2011 to 8% in FY2014.

Amara Raja Batteries operates at ROE of 22.7%. Average ROE for the last three years was 27.5%.

Capital expenditures (CAPEX)

To this fast growth Amara Raja Batteries had to invest in CAPEX.The company's CAPEX/Revenue was 10.9% in FY2014. Amara Raja Batteries's CAPEX/Revenue surged on 7.90 pp from 2.95% in FY2011 to 10.9% in FY2014. For the last three years the average CAPEX/Revenue was 5.69%.

Leverage (Debt)

Having such a fast growth profile Amara Raja Batteries keeps negative net debt at -0.4x Net Debt/EBITDA. In the last 3 years Amara Raja Batteries's leverage dropped on 0.72x from 0.29x in FY2011 to -0.42x in FY2014.

Valuation vs. comparable companies

At the end of trading day today Amara Raja Batteries traded at 14.1x EV/EBITDA which is 11.6% lower than 16.0x Auto Parts & Equipment peer group avearge calculated on the basis of 122 companies. The market closed today at 25.8x P/E for Amara Raja Batteries which is 39.8% higher than 18.5x Auto Parts & Equipment peer group avearge calculated on the basis of 16 companies.

For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The company trades at 60.0x EV/(EBITDA-CAPEX) which is not surprisingly 562% higher than 9.1x Auto Parts & Equipment industry avearge calculated based on 14 companies.

Peers in Auto Parts & Equipment

Below we provide Amara Raja Batteries benchmarking against other companies in Auto Parts & Equipment industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Exide Industries ($EXIDEIND)		-59.6%	11.5%	19.7%	30.6%
Motherson Sumi Systems ($MOTHERSUMI)		-86.4%	79.1%	71.3%	20.2%
Fiem Industries ($FIEMIND)		-54.4%	25.2%	13.4%	18.7%
L.G.Balakrishnan & Bros ($LGBBROSLTD)		-48.0%	27.7%	4.8%	15.9%
Munjal Auto Industries ($MUNJALAU)		-50.8%	30.8%	5.5%	13.8%

Median (21 companies)		-35.3%	16.9%	1.3%	4.9%
Amara Raja Batteries ($AMARAJABAT)		-66.9%	34.3%	25.1%	16.1%

Top companies by EBITDA margin, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Tube Investments Of India ($TUBEINVEST)	7.2%	33.7%	18.4%	24.4%	28.3%
Shanthi Gears ($SHANTIGEAR)	27.8%	44.6%	37.9%	30.2%	27.8%
Amtek Auto ($AMTEKAUTO)			25.1%		20.7%
Banco Products (India) ($BANCOINDIA)	7.8%	12.9%	12.2%	11.6%	14.4%
Exide Industries ($EXIDEIND)	8.3%	20.0%	14.3%	13.5%	13.8%

Median (22 companies)	5.8%	10.8%	11.1%	9.6%	9.6%
Amara Raja Batteries ($AMARAJABAT)	5.5%	15.0%	14.9%	15.7%	14.2%

Top companies by CAPEX/Revenue, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Amtek Auto ($AMTEKAUTO)			18.9%		27.1%
Subros ($SUBROS)	5.4%	11.6%	16.6%	10.7%	9.3%
Munjal Auto Industries ($MUNJALAU)	3.7%	8.4%	2.5%	2.0%	6.7%
Fiem Industries ($FIEMIND)	2.7%	21.2%	12.5%	4.7%	6.7%
Tube Investments Of India ($TUBEINVEST)	2.1%	4.7%	6.0%	8.0%	6.2%

Median (18 companies)	2.2%	7.5%	4.3%	4.5%	4.2%
Amara Raja Batteries ($AMARAJABAT)	1.3%	2.9%	3.7%	2.5%	10.9%

Top companies by ROIC, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Exide Industries ($EXIDEIND)	45.9%	34.2%	24.2%	24.3%	29.5%
Motherson Sumi Systems ($MOTHERSUMI)	15.9%	23.7%	13.5%	16.5%	25.0%
Munjal Showa ($MUNJALSHOW)	14.6%	18.8%	29.9%	23.8%	22.5%
Munjal Auto Industries ($MUNJALAU)	23.6%	26.3%	30.6%	21.5%	21.1%
L.G.Balakrishnan & Bros ($LGBBROSLTD)		20.3%	22.6%	15.2%	21.0%

Median (29 companies)	13.5%	17.3%	17.5%	13.9%	12.4%
Amara Raja Batteries ($AMARAJABAT)	39.1%	30.5%	32.1%	34.5%	30.3%

Top companies by Net Debt / EBITDA

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Tube Investments Of India ($TUBEINVEST)	5.8x	8.1x	17.6x	17.8x	17.3x
Autoline Industries ($AUTOIND)	3.3x	3.1x	3.2x	4.0x	12.0x
Automotive Stampings & Assemblies ($ASAL)	1.8x	1.8x	1.1x	3.9x	6.3x
Ucal Fuel Systems ($UCALFUEL)	8.4x	4.1x	4.3x	5.6x	5.7x
Amtek Auto ($AMTEKAUTO)			4.8x		5.3x

Median (29 companies)	1.7x	1.8x	1.2x	1.7x	0.9x
Amara Raja Batteries ($AMARAJABAT)	-0.1x	0.3x	0.1x	0.1x	-0.4x

Amara Raja Batteries stock price chart

Amara Raja Batteries financials

mln.	FY2010	FY2011	FY2012

Revenue	53,246	17,599	23,633
EBITDA	2,951	2,641	3,522
Net income	1,670	1,481	2,151
CAPEX	684.7	518.6	873.5
Debt	272.9	901.1	855.4
Cash	453.8	123.4	533.1

About Amara Raja Batteries

Amara Raja Batteries Limited manufactures and sells lead-acid storage batteries for industrial and automotive applications in India. The company offers its batteries under the Amaron, PowerZone, Power Stack, AmaronVolt, and Quanta brands. It also provides installation, commissioning, and maintenance services. The company supplies its batteries to various segments, such as telecom, railways, power control, oil and gas, UPS & EPABX, motive power, and defense; and to automobile original equipment manufacturers, replacement markets, and private label customers. Amara Raja Batteries Limited also exports its products to various countries in the Indian Ocean Rim. Amara Raja Batteries Limited was founded in 1985 and is based in Hyderabad, India.