We believe that ARBL is likely to continue gaining market
share in the automotive battery segment. The strategy followed by automotive
OEMs of sourcing from multiple vendors as against having a single vendor is
likely to benefit ARBL. Further, with the company’s strengthening distribution
network in the Western and Eastern markets, we expect replacement sales to grow
in strong double digits, going forward. We also expect healthy growth in exports
as company is targeting ~10% of sales form exports from current ~6%. Overall,
we expect ARBL to post a healthy top-line CAGR of 19% over FY2016 to FY2018E
on the back of strong recovery in OEM market, brand strength and gain in
market share. We also assume company to benefit from its ongoing capacity
expansion program. We expect ARBL to clock 20% earnings CAGR over the next
two years. We maintain our positive view on the stock and reiterate our Buy rating
on the stock with a target price of Rs1,167 (based on 28.5x FY2018E earnings).

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