Two Mid-Cap Battery Stocks Outperform Markets; shares climb 6-9% in one day. Should I buy?

Amid a robust rally in markets on Monday, two battery stocks in the mid-cap basket outperformed benchmarks. These two stocks were Amara Raja Batteries and Exide Industries. Both gained between 6 and 9% in a single day. Meanwhile, the Sensex and Nifty 50 benchmarks climbed more than 0.7% on the day. Both of these stocks have the potential for more momentum to come. Experts are optimistic about these stocks.

On BSE, Amara Raja Batteries shares sold off at 539.55 each per 29.50 or 5.78%. Stocks were close to the intraday high of 541.35 each – resulting in an increase of more than 6% on the day. The company’s market valuation is currently 9,216.19 crore.

Meanwhile, shares of Exide Industries closed at 172.45 each per 13.10 or 8.22%. Shares were also close to the day’s high on 173.35 each – resulting in an 8.8% increase on the day. The market capitalization of the company is approximately 14,658.25 crore.

In contrast, Sensex was at 59,245.98 higher by 442.65 points or 0.75%. Nifty 50 climbed 126.35 points or 0.72% and finished at 17,665.80.

Should you buy these battery shares?

Amara Raja Batteries

In Q1FY23, the company recorded consolidated net profit of 132.01 crore compared to 124.10 crore in Q1FY22. Operating revenue amounted to 2,620.53 crores in Q1FY23 vs. 1,886.17 crores in the same quarter last year. The company has witnessed strong demand in the automotive sector from the aftermarket as well as the 4-wheel and 2-wheel OEM segments. Industrial battery volumes showed healthy growth, particularly in the UPS and Telecom segments.

Amara Raja Batteries is engaged in the Indian lead-acid battery market with a strong presence in the automotive (OEM, aftermarket) and industrial battery space (UPS, telecom, solar, etc.).

Nilesh Patil, Research Analyst at Chola Wealth, said: “Over the years, Amara Raja Batteries has built a strong franchise in the lead-acid battery market with significant growth in aftermarket business. In the recent past, headwinds and industry-specific issues at the corporate level have weighed on financial performance. With a recovery in automotive demand, the company should record an improvement in its performance.

“At CMP, the stock is trading below its historical average at 13.7x FY23E and 11.6x FY24E. buy on the stock with a target price of 700,” Patil added.

Exide Industries

In the first quarter of FY23, Exide recorded standalone net profit of 226 crore compared to 125 crore in Q1FY22. Operating income amounted to 3,899 crore against 2,486 crore in QFY22. EBITDA was 387 crore against 261 crore in the first quarter of FY22. The balance sheet remains strong with zero debt and a comfortable liquidity position.

Market leader in storage batteries in India, Exide Industries holds a 60% market share in the industry. Its segment includes automotive and industrial batteries and controls 86% of the 2W market.

Antu Eapen Thomas, Research Analyst at Geojit, said: “Exide has a stronger balance sheet following the sale of its life insurance business to HDFC Life. The company will be able to maintain its cash position and fund CAPEX through internal accruals. We remain positive. in the medium to long term due to its focus on the development of batteries for electric vehicles and the respite from the market price. On a 1-year forward basis, EIL is currently trading at 13.5x (25% below its 3-year average). close to its all-time low at 12. We rate EIL at 15x (1-year average) FY24E EPS and recommend a Buy rating with a target price of 191 per share.”

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