Fundamentals

AMARA RAJA BATTERIES 

Ticker : 500008
BUY: Rs757.70
Target: Rs865 

ARBL is a manufacturer of lead acid storage batteries for industrial and automotive applications in India. In the OEM segment, it has market share of 12 percent and 35 percent in 2-wheelers and 4-wheelers respectively, whereas in the replacement market, it has 32 percent market share each in 2-wheelers and 4-wheelers. In Q2FY19, its revenue was up by 22.8 percent YoY with growth of 16 percent in volumes. Its exports grew by 40 percent YoY, major contributor being Malaysia. The EBITDA and PAT declined marginally due to high input prices. The greenfield capacity expansion will take its 2W capacity from 14.5 mn units in FY18 to 25 mn units and 4W capacity to improve from 12 mn units to 18 mn units. It has taken up pilot project of lithium-ion battery for e-rickshaws and buses. Thus, we recommend it as a BUY.

STATE BANK OF INDIA 

Ticker : 500112
BUY: Rs304.65
Target: Rs340 

SBI is the largest commercial bank in India having 20 percent market share in the Indian banking sector. In Q2FY19, the advances grew by 9 percent YoY, driven by 14 percent YoY growth in retail loans. Under retail loans, growth in home loans and personal loans was seen at 14 percent and 33 percent YoY, respectively. Management has guided for 10 percent YoY growth in advances for FY19E. Its NII rose by 12 percent YoY and the NIM improved by 13 bps YoY to 2.8 percent. The GPA and NPA ratios dipped by 74 bps and 45 bps on QoQ basis. PAT for the quarter stood at Rs 944 crore as against net loss of Rs 4875 crore in Q2FY18. Considering the improving asset quality, growth in advances and moderation in slippages, we recommend it as a BUY.