5 EV Battery Stocks to Watch for Potential Multibagger Returns – EQ Mag Pro
The proof is in numbers. Want Electric Vehicles (EVs) Sales have been on the rise with doubling in the last three years. While there were 69,012 electric vehicles on the road in 2017-18, the number crossed 200,000 units in 2020-21.
A powerful driver is the government and their tireless and sincere efforts to boost demand in this segment.
In November 2020, the government announced the incentive price 3 Tons, encouraging areas to promote local manufacturing and exports. a part of it 3 Ton ( 180 Bn) was determined for advanced cell/battery chemistry.
Apart from this, the government has announced several initiatives ranging from enhanced discounts for electric two-wheelers to incentives on purchases.
With rising fuel prices and rising pollution levels often making headlines, this is music to the ears.
Most electric vehicles use lithium-ion batteries. Unlike the lead batteries used in traditional fuel-based vehicles, a lithium-ion battery is the heart of an electric vehicle. Furthermore, they are the single largest cost head, accounting for about 40-50% of the total cost.
Top EV manufacturers import a large proportion of lithium-ion batteries from China. China is the top producer of lithium-ion batteries. However, this can change quickly.
The strong growth prospects offered by this sunrise sector have given rise to many Indian EV Battery Manufacturers, This has given them a boost in their plans to build an EV battery manufacturing plant in the country.
All the players are hoping to reap the big chunk 180 billion opportunities.
In this piece, we set out to give the top five EV battery manufacturers multi-bagger returns.
#1 Exide
First on our list is Exide Industries.
The company is a 75-year-old market leader in the lead-battery space. It is also the largest lead-battery manufacturer in India, offering a wide range of products in the automotive and industrial sectors.
It caters to some of the top OEMs (Original Equipment Manufacturers) in the country. From Tata Motors and Maruti to Bajaj in the two wheeler and three wheeler segment, Exide has a strong presence across the automotive value chain.
Apart from this, the company’s export unit is also strong. The company caters to GCC countries, USA and Canada. Exports accounted for 9% of the total business of the Company on a standalone basis during the year ended 31st March 2022.
Exide is well poised to benefit from the change in EVs.
The company has tied up with a world-leading provider of high quality energy storage solutions to manufacture Lithium-Ion batteries to cater to India’s rapidly growing EV market. Furthermore, its existing relationships with top automotive players propel it forward.
Poor demand in the automobile sector had a direct impact on the company. In addition, its insurance business also curtailed its profits. But the company has recently sold it, which will change from next year.
Sales and net profit have not grown significantly, reporting 4-year CAGR of 0.5% and 0.1%. Weak growth has impacted the return on equities. Over the years, it has fallen from 12.8% in 2018 to 6.6% in FY 2022.
#2 Amara Raja
Next on our list is Amara Raja Batteries.
The company is the second largest company in the lead-battery space in India.
It enjoys an extensive network, catering to the automotive and industrial sectors with the Amaron brand of lead batteries.
The company is in a position to benefit from the growing EV market in the country. Recently, the company has set up a technology center to develop lithium-ion batteries at its Tirupati facility in Andhra Pradesh.
Amara Raja has enjoyed a smooth road to profitability. The company’s sales have grown at a 4-year CAGR of 10.3%, while net profit has grown by 2.3% at a 4-year CAGR.
The return on equity has been strong, averaging 14.8% over the four years. The company has rewarded its investors well, with a four-year average dividend yield of 1.2%.
To learn more about the company, see its financial factsheet and latest financial results.
#3 Kabra ExtrusionTechnique
Third, on our list is Kabra ExtrusionTechnique.
The company has been a market leader in manufacturing plastic extrusion machinery for more than four decades. The company has an impressive client roster which includes Astral Polytechnic, Supreme Industries, Finolex Industries etc.
In addition, the company also operates an EV battery business under the brand name Batrix. They offer a wide range of advanced lithium-ion battery packs. However, the battery division is relatively new and has only recently become profitable.
The battery division has yet to reach optimum scale and capacity utilization. But the business is likely to do well, given the increasing penetration of electric vehicles and increasing pressure towards green energy.
The company’s revenue has grown by 11.5% at a CAGR of 4 years. 4 year CAGR in net profit has been recorded at 10.8%.
The 4-year average return on equity is 7.8%. Balance sheet is strong, it has negligible debt on its books. The company distributes dividends generously. Its 4-year average dividend yield is 1.3%.
To learn more about the company, see its financial factsheet and latest financial results.
#4 Maruti
Next on our list is Maruti Suzuki.
The country’s leading automotive company is also starting to manufacture EV batteries.
The company’s electric vehicle battery manufacturing plant in Gujarat is underway with an investment of more 73 billion
Maruti’s parent company Suzuki Motor Corporation along with its subsidiary SMG signed a memorandum of understanding with the Gujarat government to invest. 104 billion in manufacturing of EV and EV batteries in Gujarat.
The auto giant has also not remained untouched by the weak demand in the auto sector. The company’s sales grew by 3.3% at a 4-year CAGR, while net profit declined by 16.7 per cent in the same period.
This performance has trickled down to return of equity, 4 year average of 10.5%. However, none of this has discouraged the company from distributing dividends to its shareholders. The 4-year average dividend yield is 0.9%.
#5 Bharat Electronics
Last on our list is Bharat Electronics.
The company is a state-owned entity and works directly under the supervision of the Ministry of Defence. It mainly manufactures aerospace and defense electronics.
However, recently the company announced its foray into EV battery manufacturing.
In October 2022, Bharat Electronics received a letter of intent from US-based Triton Electric Vehicles India to supply EV batteries at an estimated price. The 80 billion company will manufacture these at its plant in Pune.
This order alone can increase the company’s earnings by more than 30-40% in the next 2-3 years.
In the last few years, the company’s earnings have grown by 10.5 per cent at a CAGR of 4 years. Profits have increased by 13.7% in the same period. Strong profitability has been reduced to returns that are strong at a 4-year average of 18.9%.
The company has been very generous to its shareholders. The 4-year average dividend yield is 3.2%. The company is debt free and the balance sheet is well prepared for any expansion.
in conclusion
The emergence of lithium-ion batteries as an alternative clean energy source has opened up exciting growth opportunities for existing and new battery manufacturers.
By 2030, India should accelerate the adoption of electric vehicles across vehicle categories. This number should increase from 6% of the on-road vehicle population currently to 33% in 2040. All of these will directly expand the demand for EV batteries.
We’re still at the beginning of the boom EV area Which gives us a huge opportunity to benefit from this sunrise zone.
Source: PTI
