Amara Raja shares gain 108% in CY24 so far; what lies ahead for this battery stock?

After surging 20% in the previous session, shares of Amara Raja, a leading Indian battery manufacturer, extended their gains by 6.70% in today's intraday trade, reaching an all-time high of ₹1,755 per share. Today's rally has pushed the stock to gain 43% in June so far and 108% YTD.

As part of its strategy to expand into the Li-ion cell manufacturing sector, Amara Raja signed a technical licensing agreement through its subsidiary, Amara Raja Advanced Cell Technologies Pvt. Ltd (ARACT), with Gotion's subsidiary.

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This agreement grants ARACT access to lithium-ion phosphate (LFP) technology, along with intellectual property related to cell technology. It also includes support for establishing Gigafactory facilities, integration into Gotion's global supply chain network for critical battery materials, and customer technical support.

Amara Raja has been actively seeking partnerships to enhance its presence in the Li-ion cell manufacturing segment. According to domestic brokerage firm Sharekhan, partnering with Gotion is expected to benefit Amara Raja significantly, leveraging Gotion's expertise in the Li-ion cell space.

This association is seen as pivotal for Amara Raja's ambitions in the electric vehicle (EV) battery market, particularly for electric passenger vehicles (PVs), building on its existing energy segment serving two-wheeler, three-wheeler, and telecom sectors.

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Sharekhan anticipates growth in Amara Raja's lead acid battery business from the replacement market, supported by upcoming enhancements in tubular battery capacity and the integration of its plastics business.

The brokerage expects the tubular battery capacity to come online by the end of FY25, enhancing profitability alongside the benefits of amalgamating its plastics operations.

Given Amara Raja's current valuation at a 19% discount to Exide, Sharekhan projects that increased visibility in its Li-ion cell business could narrow this gap in the near future.

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Consequently, Sharekhan maintains a 'buy' rating on the stock with a revised price target of ₹1,967, citing expectations of robust performance in the replacement segment and growth opportunities in the Li-ion cell market.

The company is one of the leading battery manufacturers in the duopolistic Indian lead-acid battery space. The company is present in the automobile as well as industrial segments. With a strong brand equity and extensive distribution network, the company is expected to grow strongly in the battery industry.

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Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.