New Energy Projects Will Drive India's Battery Evolution

Key Takeaways

• Heavy investment in advanced battery and energy storage technologies positions the company for growth as electrification and renewables adoption accelerate.
  
• In-house manufacturing, government incentives, and R&D innovation are set to boost margins, reduce volatility, and enhance business diversification.
  
• Heavy reliance on lead-acid batteries, delayed lithium-ion scale-up, and exposure to input cost, export, and supply chain risks threaten future growth and margins.

Catalysts

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

• The company is executing substantial CapEx, with nearly ₹800-900 crore in FY26 going to new energy projects and the first lithium battery gigafactory (targeting commissioning by FY27). This core investment in advanced batteries directly leverages the rapid electrification of transport, positioning Amara Raja to capture future topline growth as EV penetration accelerates, especially in India's 2
• and 3-wheeler segments.
  
• Amara Raja's ongoing expansion into energy storage solutions (ESS) for grid, commercial/industrial, and home use aligns with the growing need for battery storage from the rising adoption of renewables, which is expected to catalyze growth in new addressable markets and contribute positively to revenue and business diversification over the medium to long term.
  
• Government policy support, including GST rationalization and production-linked incentives for domestic cell manufacturing, stands to enhance the company's cost competitiveness, improve working capital efficiency, and potentially improve net margins as the Indian energy storage ecosystem matures and imports become less necessary.
  
• The ramp-up of in-house tubular battery capacity and the commissioning of a battery recycling plant are expected to reduce reliance on lower-margin traded products and external raw materials, thereby structurally improving EBITDA margins and lowering earnings volatility once full in-house production is achieved.
  
• Strategic recruitment of R&D talent, partnership with global technology providers, and technology upskilling are building a strong pipeline of innovative products and next-generation battery chemistries, which can drive future revenue growth, enable higher average selling prices, and potentially support margin expansion as advanced battery demand rises across mobility and energy storage applications.

Amara Raja Energy & Mobility Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Amara Raja Energy & Mobility's revenue will grow by 7.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.6% today to 7.7% in 3 years time.
• Analysts expect earnings to reach ₹12.3 billion (and earnings per share of ₹67.85) by about September 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 analysts price target, the company would need to trade at a PE ratio of 26.7x on those 2028 earnings, up from 21.7x today. This future PE is lower than the current PE for the IN Electrical industry at 36.8x.
• 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 15.7%, as per the Simply Wall St company report.

Amara Raja Energy & Mobility Future Earnings Per Share Growth

Risks

• Amara Raja's revenues remain highly dependent (95-96%) on lead-acid batteries, despite secular global and domestic automotive trends shifting towards lithium-ion and advanced battery chemistries; this exposes the company to long-term revenue stagnation or decline as legacy SLI and industrial lead-acid markets plateau or shrink.
  
• Intense margin pressure is evident, with subdued quarterly EBITDA margins (~11.5%) due to elevated material input costs (e.g., antimony), persistent power and employee cost inflation, and a higher trading mix, indicating ongoing earnings risk and less capacity to absorb future raw material or regulatory shocks.
  
• Export growth has declined by 7-8% YoY, with the management citing competitive intensity and tariff barriers in key APAC and Middle East markets; weak export momentum and rising global competition (including from Chinese/Korean giants) could further undermine topline growth potential and compress net margins.
  
• Delayed scaling of lithium-ion manufacturing (first gigafactory expected only by FY27) leaves Amara Raja exposed to rapid technological shifts and aggressive competition in new energy batteries; slow ramp-up risks market share loss and erosion in future revenue from fast-growing EV and storage segments.
  
• Dependency on imported critical components and battery raw materials (especially from China) for lithium-ion production increases supply chain risk, import cost volatility, and geopolitical exposure, which may negatively impact future margins, cash flows, and the ability to competitively scale new energy businesses.

Valuation

• The analysts have a consensus price target of ₹1163.2 for Amara Raja Energy & Mobility based on their expectations of its future earnings growth, profit margins and other risk factors. 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 analyst's consensus, you'd need to believe that by 2028, revenues will be ₹160.0 billion, earnings will come to ₹12.3 billion, and it would be trading on a PE ratio of 26.7x, assuming you use a discount rate of 15.7%.
• Given the current share price of ₹1021.2, the analyst price target of ₹1163.2 is 12.2% 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.