Amara Raja Battery is a company which need no explanation for investors .It is one of the star performer in Indian stock market for the past many years. Company is the second largest battery maker in India next to Exide and the leader in Industrial battery segment.Company having a 26% equity participation and technical collaboration with US conglomerate JohnsonControls.ARB introduced VRLA technology in India and with this ARB emerged as a strong competitor to then undisputed leader - Exide.From an Industrial battery maker ,now ARB grown as a known player in automotive segment and currently the share in auto-industrial batteries stand as 60:40 .In auto sector itself ,company’s major sales coming from replacement market where the margins are almost double compared with OEM supply.To mitigate the impact of slow growth in auto sector ,company is now looking into home UPS segment where potential is immense due to power shortage issues.
Since company is running near to 100% capacity utilisation in all segments ,it is now expanding its production capacities across segments.Part of this expanded capacity will be commercialised in the second half of this FY and and the rest in next FY.It is increasing its Medium Valve Regulated Lead Acid (MVRLA) battery capacity from 1.8 million unit per annum to 3.60 million units per annum (production to start from Q3 FY 2013-14) , Large Valve Regulated Lead Acid (LVRLA) battery capacity from 760 million Ah per annum to 1 billion Ah per annum (production to start from Q4 FY 2013-14), Four-wheeler battery capacity from 5.6 million unit per annum to 8.2 million units per annum (production to start from Q2 FY 2014-15), Two-wheeler battery capacity from 4.8 million unit per annum to 8.4 million units per annum (production to start from Q3 FY 2013-14). As per company estimates its revenue will increase by Rs.1675 Cr due to this capacity expansion.I believe .company’s brands AMARON,QUANTA,POWER STACK,POWER SLEEK,POWER ZONE ..etc will eat the market share of the main competitor in a big way once the capacity expansion completed.
Led by a team of rural youth ,Amara Raja always paying much attention to practical wisdom and hard work in managing and growing their company rather than copy book style theoretical approach.In last five years its profit grown from Rs.80 Cr to Rs.286 Cr and the ongoing capacity expansion may take it to a new level. Company is going to declare its second quarter result on 14thNovember.Due to capacity constraints and unfavourable currency movements during this quarter ,possibility for a temporary blip in performance can’t be ruled out .If it happens and there is any knee jerk reaction on account of this ,an entry around Rs.280 is an excellent opportunity for long term investors.
Link to Websites
Disc: I have vested interest in ARB
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