Amara Raja: Why Nuvama retained Buy rating after meeting CFO Delli Babu
Nuvama said Amara Raja's management reiterated its FY26 demand guidance, projecting 6–7 per cent growth in 2W aftermarket demand and 10–11 per cent growth in 4W aftermarket demand.
- Oct 2, 2025,
- Updated Oct 2, 2025 9:59 AM IST
Nuvama Institutional Equities has reiterated its 'Buy' rating on Amara Raja Energy & Mobility Ltd with a target price of Rs 1,120, valuing the lead-acid battery (LAB) business at 15 times September 2027E EPS, the lithium business at Rs 169 per share and investments at Rs 42 apiece. The stock is down 18 per cent in 2025 so far against a 3.5 per cent rise in the BSE Sensex during the same period.
The brokerage’s stance follows an analyst meet with CFO Delli Babu and Battery Pack business head Dwaraka B, where the management outlined demand prospects, margin trajectory and updates on its lithium-ion cell plant.
Nuvama said Amara Raja's management reiterated its FY26 demand guidance, projecting 6–7 per cent growth in 2W aftermarket demand and 10–11 per cent growth in 4W aftermarket demand. Amara Raja expects its LAB business to outpace the industry by 3–5 per cent on market share gains and higher exports.
In OEMs, the company’s market share stands at 27–28 per cent in 2W and 36 per cent in 4W, while in the aftermarket, share exceeds 35 per cent in both 2W and passenger vehicles (PVs).
Nuvama noted that Amara Raja’s Ebitda margin, which stood at 11.5 per cent in Q1FY26, is guided to expand to 13 per cent in Q4FY26E and 14 per cent in FY27E. This improvement will be led by the revival of its tubular plant, resolution of power cost issues, and commissioning of a new recycling facility. However, near-term margins remain under pressure from elevated antimony prices and a weaker rupee.
The Indian LAB market is projected to grow from $4.6 billion in FY25 to $5.8 billion by FY30 (5 percent CAGR). The management reiterated that LAB technology will remain relevant for the next 15–20 years, particularly in mobility applications, dispelling fears of disruption. Current LAB capacity stands at 40 million units for 2W and 20 million units for PVs, with potential ramp-up through debottlenecking to 46 million and 25 million units, respectively.
Nuvama said Phase 1 of Amara Raja’s lithium cell plant (1 GWh NMC chemistry) is now scheduled to commence in H2FY27E, a deferral from the earlier FY26 target. The plant will initially produce 217,00 cells, with scalability up to 2 GWh. The management, Nuvama said, is also evaluating LFP chemistry. Capex is pegged at $50 million per GWh with an asset turnover of 1 time. The business is expected to break even at 2 GWh Ebitda level, with profitability likely at 4 GWh.
Total capex for FY26 is pegged at Rs 1,200 crore, of which Rs 800 crore will be spent on the lithium business and Rs 400 crore on lead-acid operations. By FY27E, cumulative investment in the new energy business is expected at Rs 2,500 crore, with half already infused.
Nuvama Institutional Equities has reiterated its 'Buy' rating on Amara Raja Energy & Mobility Ltd with a target price of Rs 1,120, valuing the lead-acid battery (LAB) business at 15 times September 2027E EPS, the lithium business at Rs 169 per share and investments at Rs 42 apiece. The stock is down 18 per cent in 2025 so far against a 3.5 per cent rise in the BSE Sensex during the same period.
The brokerage’s stance follows an analyst meet with CFO Delli Babu and Battery Pack business head Dwaraka B, where the management outlined demand prospects, margin trajectory and updates on its lithium-ion cell plant.
Nuvama said Amara Raja's management reiterated its FY26 demand guidance, projecting 6–7 per cent growth in 2W aftermarket demand and 10–11 per cent growth in 4W aftermarket demand. Amara Raja expects its LAB business to outpace the industry by 3–5 per cent on market share gains and higher exports.
In OEMs, the company’s market share stands at 27–28 per cent in 2W and 36 per cent in 4W, while in the aftermarket, share exceeds 35 per cent in both 2W and passenger vehicles (PVs).
Nuvama noted that Amara Raja’s Ebitda margin, which stood at 11.5 per cent in Q1FY26, is guided to expand to 13 per cent in Q4FY26E and 14 per cent in FY27E. This improvement will be led by the revival of its tubular plant, resolution of power cost issues, and commissioning of a new recycling facility. However, near-term margins remain under pressure from elevated antimony prices and a weaker rupee.
The Indian LAB market is projected to grow from $4.6 billion in FY25 to $5.8 billion by FY30 (5 percent CAGR). The management reiterated that LAB technology will remain relevant for the next 15–20 years, particularly in mobility applications, dispelling fears of disruption. Current LAB capacity stands at 40 million units for 2W and 20 million units for PVs, with potential ramp-up through debottlenecking to 46 million and 25 million units, respectively.
Nuvama said Phase 1 of Amara Raja’s lithium cell plant (1 GWh NMC chemistry) is now scheduled to commence in H2FY27E, a deferral from the earlier FY26 target. The plant will initially produce 217,00 cells, with scalability up to 2 GWh. The management, Nuvama said, is also evaluating LFP chemistry. Capex is pegged at $50 million per GWh with an asset turnover of 1 time. The business is expected to break even at 2 GWh Ebitda level, with profitability likely at 4 GWh.
Total capex for FY26 is pegged at Rs 1,200 crore, of which Rs 800 crore will be spent on the lithium business and Rs 400 crore on lead-acid operations. By FY27E, cumulative investment in the new energy business is expected at Rs 2,500 crore, with half already infused.