Brokerage firm Motilal Oswal has kept a Neutral rating on Amara Raja Energy & Mobility with a target price of Rs 740. While the company's recent profit surpassed brokerage estimates, rising interest costs from heavy new energy investments and high raw material prices remain key concerns for investors.
Brokerage firm Motilal Oswal has maintained a Neutral rating on Amara Raja Energy & Mobility, setting a target price of Rs 740. This assessment follows the company's recent financial performance for the second quarter of the 2027 fiscal year. The brokerage's outlook reflects a balance between the company's core operational resilience and the growing financial pressure from its strategic transition into advanced energy solutions.
In the second quarter of FY27, Amara Raja Energy & Mobility reported a revenue of INR 4,108.7 crore, marking an 18.5% increase compared to the same period last year. Despite the revenue growth, net profit declined by 44.8% to INR 152.5 crore. The company’s EBITDA margin also saw a contraction, falling to 8.8% from 10.8% in the previous year. According to the brokerage, while the profit figure came in lower on a year-on-year basis, it still managed to surpass its internal estimates by 13%, aided partly by price increases implemented earlier in the year.
The core challenge highlighted by the brokerage and market data is the combination of persistent cost pressures and debt-funded growth. The company continues to face high procurement costs for essential raw materials like alloys, sulphuric acid, and polypropylene. These external headwinds are occurring at a time when the company is scaling up its capital expenditure. The board recently approved an investment of INR 2,320 crore to expand battery pack capacity to 9 GWh and to establish an LFP cell manufacturing plant.
This aggressive push into the "New Energy" sector requires significant capital, much of which is being funded through debt. As a result, rising interest expenses are exerting pressure on the company's bottom line. The brokerage has consequently lowered its earnings estimates for FY27 and FY28, reflecting the expected impact of these interest costs on profitability.
For investors, the outlook remains tied to how the company manages the transition from its established lead-acid battery business to its new energy portfolio. The traditional business provides the necessary cash flow, but the long-term profitability will depend on the successful execution and cost management of the new lithium-ion and cell manufacturing projects. Key monitorables for shareholders include the trend in raw material prices, the pace of debt accumulation, and the ability of the new energy projects to start contributing to margins without overwhelming the balance sheet.