Giga Corridor And Renewables Will Transform Advanced Battery Markets

Key Takeaways

• Early positioning in global electrification and self-sufficiency in resources set the stage for superior export growth, margin expansion, and reduced input cost risks.
  
• Integrated lithium initiatives and strong presence in new energy and storage solutions enable the company to dominate emerging high-margin markets and benefit from regulatory support.
  
• Heavy dependence on legacy batteries, slow new tech ramp-up, and cost disadvantages threaten market share, margins, and resilience to global demand and regulatory shifts.

Catalysts

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

• Analyst consensus expects export growth and new energy recovery to drive revenue, but this significantly understates Amara Raja's first-mover advantages in international expansion, as early entry into Western and European markets positions the company for exponential export growth and margin expansion as global electrification accelerates.
  
• While analysts broadly agree on margin improvement from tubular battery plant reinstatement and recycling, they underestimate the scale of Amara Raja's resource security and alloy self-sufficiency, which will not only lift net margins but could structurally reduce input cost volatility and yield above-peer operating leverage.
  
• Amara Raja's integrated push into lithium cell manufacturing through the Giga Corridor and localized R&D capabilities directly aligns with the surging demand for advanced batteries across electric mobility, grid storage, and distributed energy systems, laying the foundation for outsized, recurring, high-margin earnings from new markets beyond automotive.
  
• The company's leadership in aftermarket and home energy battery solutions-combined with its vast distribution reach-will enable it to capture disproportionate share from the expansion of India's vehicle base and the rapid adoption of home and commercial solar-plus-storage, supporting robust revenue and earnings growth.
  
• Supportive policies that promote local sourcing and "Make in India" manufacturing, alongside the implementation of battery recycling and circular economy regulations, provide Amara Raja with long-term regulatory tailwinds and the opportunity to lock in market share and profit pools across the full battery value chain, with direct positive impact on net margins and return on equity.

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 9.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 7.3% today to 7.9% in 3 years time.
• The bullish analysts expect earnings to reach ₹13.5 billion (and earnings per share of ₹73.83) by about July 2028, up from ₹9.4 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 35.4x on those 2028 earnings, up from 19.6x today. This future PE is lower than the current PE for the IN Electrical industry at 42.1x.
• 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 16.72%, as per the Simply Wall St company report.

Amara Raja Energy & Mobility Future Earnings Per Share Growth

Risks

• Amara Raja continues to derive 95 percent of its revenue from the lead-acid segment, exposing it to long-term risk from accelerating adoption of solid-state and advanced lithium chemistries, which could erode market share, compress revenue growth, and eventually reduce core operating profits as the global industry transitions away from legacy battery types.
  
• Investments in the New Energy Business are substantial, with about ₹1,000 crore planned CapEx annually and multi-year payback periods, but management admits current returns are not benchmarkable until at least 8 to 10 gigawatt hours of scale is reached, indicating prolonged period of margin pressure and limited earnings contribution from this segment.
  
• Global battery prices, especially for advanced chemistries sourced from China, are falling rapidly, which management says makes local manufacturing 15 to 20 percent more expensive initially and may keep Amara Raja uncompetitive in price-sensitive segments, negatively impacting both future revenue potential and EBITDA margins.
  
• The company's exports remain mostly to aftermarket clients and continue to show muted or declining demand, especially in Western and APAC regions, while Amara Raja is yet to establish significant international OEM business, leaving earnings highly exposed to the Indian market and its economic cycles.
  
• Margins are already under pressure from rising material and energy costs, with regulatory changes compounding cost volatility and a historical reliance on price hikes to defend profitability, suggesting that net income could be further squeezed if environmental regulations tighten further or raw material supply chains face disruptions due to geopolitical factors.

Valuation

• The assumed bullish price target for Amara Raja Energy & Mobility is ₹1649.02, which represents two standard deviations above the consensus price target of ₹1191.87. 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 ₹170.1 billion, earnings will come to ₹13.5 billion, and it would be trading on a PE ratio of 35.4x, assuming you use a discount rate of 16.7%.
• Given the current share price of ₹1011.35, the bullish analyst price target of ₹1649.02 is 38.7% 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.