Amara Raja, Exide Industries slide as much as 30% from current peaks. What ought to buyers do?

Shares of battery producers Amara Raja Power and Exide Industries have been on a constant downward trajectory over the previous 5 months, together with November, as each shares face persistent promoting stress.

The businesses’ current monetary outcomes for the September quarter have failed to spice up investor sentiment as each corporations reported earnings that fell wanting analysts’ expectations, contributing to the continued decline of their inventory costs.

At present ranges, Amara Raja Power’s inventory is buying and selling at ₹1,303 per share, which represents a 27% decline from its current peak of ₹1,775. Equally, Exide Industries’ shares are priced at ₹437, down 30% from their excessive of ₹620, which they hit in July.

The efficiency of each corporations throughout the reporting quarter was impacted by extra channel inventories for auto OEMs, which dampened demand throughout the automotive sector. For the primary time in additional than two years, gross sales of automobiles to sellers declined in Q2FY25 as producers scaled again dispatches to cut back excessive ranges of unsold stock.

Automakers’ gross sales to sellers fell by a cumulative 1.8% YoY to roughly 10 lakh models within the second quarter.

Regardless of this, each corporations skilled wholesome demand within the aftermarket division, which incorporates changing unique gear batteries in addition to robust demand for two-wheeler batteries.

Wanting on the Q2 numbers, Amara Raja reported a web revenue of ₹236 crore, up from ₹226 crore a yr earlier. Nevertheless, this marks the slowest quarterly revenue development in a yr. Its income from operations grew by 10% YoY to ₹3,251 crore in Q2 FY25, however this was its slowest development because the December quarter.

Equally, Exide’s income from operations in Q2 grew by 4% YoY, reaching ₹4,267 crore. Nevertheless, revenue after tax for Q2 FY25 declined to ₹233 crore, down from ₹287 crore in the identical interval final yr.

Analyst trim goal costs submit Q2

For Amara Raja, home brokerage agency Kotak Institutional Equities has stored its ‘Promote’ score on the inventory as a consequence of costly valuations and revised its goal worth downward to ₹1,050 per share from an earlier goal of ₹1,075.

The brokerage has lowered its FY2025-27 standalone EPS estimates by 6-7% as a consequence of assumptions of a decrease EBITDA margin, decreased different earnings, and better curiosity bills. Whereas the brokerage expects the corporate’s lead-acid enterprise to stay secure over the medium time period, it additionally highlighted dangers in the long run because the trade shifts in the direction of the lithium battery enterprise, particularly within the telecom phase, the place competitors is intensifying.

Motilal Oswal additionally retained its ‘Impartial’ score on the inventory with a goal worth of ₹1,310. It stated the corporate’s foray into the lithium-ion battery market is seen as strategically sound given the phase’s alternatives and the dangers dealing with its core enterprise.

Nevertheless, it identified challenges comparable to restricted market alternatives as a consequence of present OEM partnerships, the low-margin nature of the lithium-ion enterprise doubtlessly diluting returns, and the long-term viability of the expertise, regardless of the big capital funding required.

Alternatively, Elara Capital raised its goal worth for Amara Raja’s inventory to ₹1,573, whereas sustaining its ‘Accumulate’ score.

For Exide Industries, international brokerage agency Citi revised its worth goal to ₹540 per share, down from the sooner goal of ₹610. Kotak Institutional Equities additionally lowered its worth goal for Exide to ₹300 per share, from ₹315, whereas sustaining its ‘Promote’ score.

Kotak believes the corporate’s lithium battery (LiB) enterprise will scale up within the coming years, nevertheless, profitability and return ratios are anticipated to stay beneath stress as a consequence of increased capital expenditure necessities and the commoditised and B2B nature of the enterprise. 

Nuvama Institutional Equities has additionally decreased its goal worth for Exide to ₹460 per share, down from the earlier goal of ₹550, whereas sustaining a ‘maintain’ score on the inventory.