Accelerated EV Adoption Will Expand Advanced Lithium Battery Opportunities

Key Takeaways

• Vertical integration and proprietary technology are set to significantly improve margins, while new recycling and battery plants drive long-term gains.
  
• Expansion in advanced battery chemistries and gigafactory investments position the company for leading growth as electrification and energy storage demand accelerates.
  
• Heavy reliance on legacy batteries, slow energy transition, and exposure to volatile markets threaten growth, margin stability, and competitiveness as industry dynamics shift.

Catalysts

Manufactures and sells lead-acid storage batteries for industrial and automotive applications in India and internationally.

• While analyst consensus expects positive margin normalization as costs and power issues resolve, the ramp-up of Amara Raja's state-of-the-art tubular battery and recycling plants could drive margins substantially above historic averages, given improved vertical integration and proprietary technology-this positions net margins for outsized gains as the full benefits flow through.
  
• Analysts broadly agree on New Energy segment recovery via localization and product expansion, but this is likely understated; Amara Raja's aggressive investment in gigafactory capacity and scale-up in lithium battery pack volumes for telecom and mobility applications could enable a step-change in revenue growth and margin mix ahead of schedule, given surging electric vehicle adoption and grid storage needs.
  
• The company's early-mover investments in advanced chemistry batteries and establishment of a dedicated, globally-sourced R&D talent pool open the door for Amara Raja to become a technology partner of choice in the rapidly growing energy storage system (ESS) market, unlocking high-value multi-year contracts and driving sustainable long-term earnings growth.
  
• With India and global markets undergoing an accelerated shift toward electrification in mobility and renewable integration, Amara Raja's leadership in both legacy lead-acid and next-gen lithium chemistries positions it for outsized share gains and diversified revenue streams as more applications transition to battery power.
  
• Structural shifts in India's battery sector-such as GST rationalization, increasing formalization, and regulatory incentives-stand to disadvantage unorganized players and enable formal leaders like Amara Raja to consolidate share in both domestic and export markets, incrementally boosting both topline growth and profits over the coming years.

Amara Raja Energy & Mobility Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Amara Raja Energy & Mobility compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Amara Raja Energy & Mobility's revenue will grow by 9.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 6.6% today to 7.6% in 3 years time.
• The bullish analysts expect earnings to reach ₹13.0 billion (and earnings per share of ₹71.42) by about August 2028, up from ₹8.6 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 34.7x on those 2028 earnings, up from 21.0x today. This future PE is lower than the current PE for the IN Electrical industry at 38.2x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 15.67%, as per the Simply Wall St company report.

Amara Raja Energy & Mobility Future Earnings Per Share Growth

Risks

• Amara Raja continues to derive 95–96 percent of its revenue from traditional lead-acid batteries, while revenue contribution from new energy and lithium segments remains small; this slow transition risks obsolescence as global battery markets rapidly shift toward advanced chemistries, threatening long-term revenue growth.
  
• Management highlighted dependency on the Indian automotive market, which exposes the company to cyclical downturns and OEM sluggishness, and any prolonged weakness or contraction in domestic auto sales could negatively affect both revenue stability and earnings over time.
  
• The company faces export volume declines and intense tariff-related and competitive challenges in international markets; continued weakness in exports and rising global competition can erode margins and dampen earnings potential.
  
• Ongoing and accelerating investments into new energy projects and R&D, with cumulative infusions and substantial upcoming capex, create a risk of operating margin compression if revenue from new businesses underwhelms or project execution is delayed.
  
• Rising volatility and input cost pressures from raw materials such as antimony, lead, and lithium have recently subdued EBITDA margins, and persistent or escalating commodity costs may further compress profitability if not fully offset by pricing power.

Valuation

• The assumed bullish price target for Amara Raja Energy & Mobility is ₹1595.92, which represents two standard deviations above the consensus price target of ₹1163.2. This valuation is based on what can be assumed as the expectations of Amara Raja Energy & Mobility's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹1680.0, and the most bearish reporting a price target of just ₹925.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be ₹171.0 billion, earnings will come to ₹13.0 billion, and it would be trading on a PE ratio of 34.7x, assuming you use a discount rate of 15.7%.
  
• Given the current share price of ₹987.2, the bullish analyst price target of ₹1595.92 is 38.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.