Best EV Battery Maker: Exide Industries vs Amara Raja Energy & Mobility

Editor’s note: India’s leading EV battery makers Exide and Amara Raja have been stellar performers, doubled investors’ money in the last one year.

In fact, several experts are of the opinion that the upward journey for these stocks may have just started, and it could go up substantially even from these levels.

So, how should an investor deal with this development?

Which EV battery stock among Exide and Amara should investors prefer?

Earlier this year in January, we did a deep dive analysis of Exide Industries and Amara Raja to understand which company has a better chance of making it to the top.

Continue reading our detailed comparison report to know more.

Best EV Battery Stock: Exide Industries vs Amara Raja Energy & Mobility

At present, India majorly imports lithium-ion batteries for electric vehicle (EV) production.

However, the government is encouraging domestic production of these batteries through policies such as Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME II) scheme and the Production-Linked Incentives (PLI) scheme.

After announcing these schemes, several foreign companies including Tesla, and VinFast have expressed interest to set up factories in India.

All these factors are aiding the growth of the Indian battery market which is currently valued at US$ 16.8 billion (bn) (Rs 1.3 trillion) and is expected to grow at a compound annual growth rate (CAGR) of 10.5% to reach US$ 27.7 bn (Rs 2.3 tn) by 2028.

To add to this, the government's focus on electrification of India's vehicle fleet by 2030, growing need for sustainable and cleaner alternatives to fuel vehicles, India's robust supply chain and thriving battery manufacturing industry makes the country a potential preferred supplier for global companies.

While several battery manufacturers will benefit from this growth, two major players, Exide Industries and Amara Raja Energy & Mobility, stand to gain the most.

In this article, we have compared these two companies on various parameters to find out which is a better company.

Business Overview

# Exide Industries

Exide Industries is a leading manufacturer of storage batteries in India. It supplies its products to automotive, power, solar, telecom, and submarine companies.

The company has ten manufacturing plants with a production capacity of 54 million (m) units of automotive power and 5.8 billion (bn) ampere-hour (ah) of industrial power.

It has a pan India presence with a wide distribution network with over 150 warehouses and sales offices, 95,000 direct and indirect dealers, and over 1600 Exide care outlets. It also exports to over 60 countries.

The company's clients include Tata, Maruti, Nissan, Hero MotoCorp, Ericsson, Cipla, BHEL, and BSNL.

# Amara Raja Energy & Mobility

The flagship company of the Amara Raja group, Amara Raja Energy & Mobility, is one of the largest manufacturers of lead-acid batteries.

It sells its leading brands, such as Amaron, PowerZone, Amaron Quanta, and Amaron Volt, for automotive and industrial uses.

The company has seven manufacturing plants with a capacity to produce 19 m 4-wheeler batteries, 30 m 2-wheeler batteries, and 2.3 bn ah of industrial batteries.

It has a strong distribution network of 23 branches, 39 distribution points, 500+ Amaron franchisees, 100,000+ points of sale, 1,000+ power zone retail stores and 2000+ extensive service hubs in India. It also exports to over 50 countries.

Some of its customers include Ashok Leyland, Ford, Honda, Hyundai, and Mahindra and Mahindra.

Particulars	Exide industries	Amara Raja Energy & Mobility
Market Cap (in Rs billion)*	398.3	206.2
Market Share	50%	35%

Data Source: Equitymaster

Between the two, Exide Industries has a larger market cap of Rs 398.3 bn as compared to Amara Raja Batteries, which has a market cap of Rs 206.2 bn.

Moreover, Exide Industries also has a larger market share of 50% in the domestic battery market compared to Amara Raja Batteries, which has a market share of 35%.

Exide Industries also has a dominant market share in the replacement battery space.

A higher market share of Exide Industries is primarily due to its dominant presence in the battery industry and higher manufacturing capacity.

If we compare the performance of both companies on the stock market over the last year, both have outperformed the benchmark Nifty 50 index.

However, Exide Industries outperformed by giving a 143% return as opposed to the 87% return by Amara Raja.

# Revenue

In terms of revenue, Amara Raja outpaced its competitor.

In the last five years, its net sales have grown at a compound annual growth rate (CAGR) of 8.9%, whereas Exide Industries' net sales grew at a CAGR of 0.5%.

Revenue

Net Sales (in Rs m)	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23	5-Year CAGR
Exide industries	1,47,209	1,44,710	1,03,594	1,27,892	1,50,782	0.50%
Amara Raja Energy & Mobility	67,931	68,392	71,498	86,972	1,03,882	8.90%

Data Source: Equitymaster

Diversified revenue streams and established relationships with its clients have helped the company almost double its revenue in the last five years.

To add to this, its wide distribution reach has also helped Amara Raja to grow its revenue.

Exide Industries, on the other hand, witnessed muted growth. Its revenue fell drastically post-COVID due to a fall in automotive demand and increased competition in the battery industry from organised and unorganised players.

However, the company's revenue has been growing in the last two years on account of favourable demand from end-user segments.

Moreover, the company's foray into lithium-ion batteries in the financial year 2022 also supported the revenue growth.

# Profitability

In the last five years, the earnings before interest tax depreciation and amortisation (EBITDA) of Amara Raja has grown at a CAGR of 6.5%, as against the EBITDA of Exide Industries, which saw a degrowth of 0.5%.

The profit after tax for Amara Raja grew by a CAGR of 7.5%, whereas Exide Industries witnessed a degrowth of 0.6%.

Profitability

EBITDA (in Rs m)	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23	5-Year CAGR
Exide industries	16,380	13,998	13,657	14,024	15,937	-0.50%
Amara Raja Energy & Mobility	9,505	10,983	11,147	10,224	13,031	6.50%
PAT (in Rs m)	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23	5-Year CAGR
Exide industries	8,474	7,625	7,334	6,943	8,228	-0.60%
Amara Raja Energy & Mobility	4,832	6,608	6,468	5,126	6,945	7.50%
Gross Profit Margin	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23
Exide industries	11.10%	9.70%	13.20%	11.00%	10.60%
Amara Raja Energy & Mobility	14.00%	16.10%	15.60%	11.80%	12.50%
Net Profit Margin	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23
Exide industries	5.80%	5.30%	7.10%	5.40%	5.50%
Amara Raja Energy & Mobility	7.10%	9.70%	9.00%	5.90%	6.70%

Data Source: Equitymaster

Clearly, Amara Raja is ahead of Exide Industries in terms of profitability.

Sourcing of power from the company's captive solar plant and higher growth in export revenue have helped the company improve its profits.

Further, the company's acquisition of the plastic division from a group company is expected to help in reducing operational costs going forward.

Exide Industries' profits primarily fell due to a sharp increase in the price of raw materials. Although the company took measures to reduce the cost of its operations, it couldn't pass on the increase in raw material prices to its customers.

However, with inflation reduction, the margins are expected to increase.

# Debt Management

Both Exide Industries and Amara Raja are zero-debt companies.

Exide is in the process of setting up a plant for lithium-ion cell production and a plant to manufacture absorbent glass mat (AGM) batteries with a capex of around Rs 40 bn.

Amar Raja, on the other hand, is investing Rs 95 bn in capex to set up a 16 GW (gigawatt) lithium-ion battery gigafactory, an advanced energy research and innovation centre, and 2GW lithium plants using NMC technology.

Despite such high capex plans, both companies have sufficient cash balance to meet the capex requirements comfortably.

In addition to this, the companies have a high-interest coverage ratio, which indicates their liquidity position.

Amara Raja's interest coverage ratio in the financial year 2023 was 43.9x, whereas Exide Industries' interest coverage ratio was 15.5x.

# Financial Efficiency

The return ratios indicate a company's ability to generate profits from the capital. The higher the ratios, the better the company's financial efficiency.

The two ratios that help determine a company's financial efficiency are Return on Capital Employed (RoCE) and Return on Equity (RoE).

The RoCE and RoE of Amara Raja and Exide Industries have fallen slightly when compared to five years ago. Increases in raw material prices have led to a fall in the companies' return ratios.

However, the ratios have been improving for the last year for both companies.

Financial Efficiency

ROCE	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23
Exide industries	22.30%	16.70%	14.10%	9.60%	10.80%
Amara Raja Energy & Mobility	21.80%	23.10%	20.90%	15.50%	18.30%
ROE	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23
Exide industries	13.90%	11.80%	10.10%	6.60%	7.40%
Amara Raja Energy & Mobility	14.50%	18.10%	15.40%	11.30%	13.10%

Data Source: Equitymaster

# Dividend

Dividends are the profits that a company distributes to its shareholders. A company paying dividends continuously is considered more stable than a company that doesn't.

Dividend

Dividend Per Share (Rs)	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23	5-Year CAGR
Exide industries	2.4	4.1	2	2	2	-3.60%
Amara Raja Energy & Mobility	7.1	11	11	4.5	6.1	-2.90%
Dividend Yield	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23
Exide industries	1.00%	2.30%	1.10%	1.20%	1.20%
Amara Raja Energy & Mobility	0.90%	1.90%	1.50%	0.60%	1.10%
Dividend Payout Ratio	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23
Exide industries	24.10%	45.70%	23.20%	24.50%	20.70%
Amara Raja Energy & Mobility	25.00%	28.40%	29.00%	15.00%	15.00%

Data Source: Equitymaster

In the last five years, the dividends paid by Amara Raja and Exide industries saw a degrowth of 2.9% and 3.6%, respectively.

In terms of dividend per share, Amara Raja is ahead of Exide Industries. However, in terms of dividend yield and dividend payout ratio, Exide Industries beats Amara Raja.

The five-year average dividend payout of Exide Industries is 27.6%, whereas Amara Raja's average payout is 22.4%.

# Valuations

Valuation ratios are important parameters that every investor must look at. This is because these ratios will help determine the actual worth of a company.

Two important valuation ratios to consider are the price-to-earnings (P/E) ratio and the price-to-book value (P/B) ratio.

These ratios tell us whether a stock is overvalued or undervalued.

A company is considered overvalued if it has a higher valuation than its peers or industry and is considered undervalued if it has a lower valuation.

Valuations	Exide industries	5-Year Average	Amara Raja Energy & Mobility	5-Year Average
P/E (x)	45.1	20.7	25.4	17.4
P/B (x)	3.1	2.0	3.5	2.7

Data Source: Equitymaster

In terms of P/E, Exide Industries is overvalued when compared to Amara Raja. Its P/B, however, is slightly lower than Amara Raja.

When compared to their five-year average, Exide Industries is overvalued, and Amara Raja is undervalued.

When compared to the industry average, both companies are undervalued, but Amara Raja has a higher margin of safety.

Exide Industries vs Amara Raja: Which EV Battery Stock is Better?

Amara Raja is leading in terms of revenue and profit growth. It also has a higher interest coverage ratio and is undervalued when compared to its competitors.

Exide Industries is ahead when it comes to return ratios, it pays better dividends, and it has a higher market share in the domestic battery market.

Moreover, the company's manufacturing capacity is also higher than Amara Raja's.

This gives Exide Industries an edge over Amara Raja and manufactures a higher number of units during the said period.

To add to this, the company also has a leading position in the replacement market, making it a top player in the industry.

Exide Industries is heavily investing in capex to take advantage of the EV revolution. It has set up lithium-ion plants and is now working on battery energy storage systems (BESS) and their deployment for future use.

The company is one of the early movers in the first 70% of the value chain where it will start manufacturing lithium-Ion cells as well.

This will add another revenue stream to the company's overall business and may prove to be a key growth driver going forward.

Amara Raja, on the other hand, is setting up lithium-ion plants in India to be a part of the EV revolution. It is also setting up an advanced energy research and innovation centre to explore the opportunities in the battery market and develop new products.

The recent rally in Amara Raja shares comes after the company submitted bids to the government to set up a battery manufacturing gigafactory in India, along with six other companies such as Reliance Industries and JSW Neo Energy.

The companies have submitted bids to set up manufacturing plants for advanced chemistry cells with a total capacity of 10GWh. These will be in line with the government's production-linked incentive scheme.

The stock also rallied amid a rally in battery stocks on optimism over further collaborations with foreign vehicle manufacturers.

Battery stocks rallied after Exide Industries announced a strategic cooperation to produce lithium iron phosphate cells for Hyundai Motor Co. and Kia Corp.

Global carmakers, including BYD, are doubling down on the burgeoning electric vehicle market in the South Asian nation as sales cool in China, the US and Europe. This is expected to give local component makers a long term boost.

Several factors, including high importance to EV adoption, roll out of 5G, growth in automotive aftermarket, and shift from unorganised to organised market, will contribute to the growth of the Indian battery market and both Exide Industries and Amara Raja are well positioned to take advantage of this growth.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...