Amara Raja faces margin pressure for the third straight quarter

Amara Raja trails Exide for third straight quarter…

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Amara Raja faces margin pressure on account of higher lead prices which hit the highest levels in at least five years in March quarter. In addition to the lead prices, higher share of automaker (OEM) volumes in the mix and higher employee cost related to the commissioning of the two wheeler plants also affected the profitability.

Why is this important

The revenue growth of Amara Raja has trailed that of Exide for the third straight quarter, which indicates the strong position of the market leader Exide. Further, in the last three quarters although Amara Raja reported q-o-q decline in the margins, Exide report a q-o-q increase in the margins.

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How will the stock be impacted

The increase in lead prices is a major concern for the battery manufacturers and investors should await a firm trend before taking an exposure to either of the stocks.

LME lead

Amara Raja (CMP Rs. 803, M Cap Rs. 13,717 cr, FY2020 PE: 20.8), Exide Industries (CMP Rs. 250, M Cap Rs. 21,111 cr, FY2020 PE: 19.2)

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