The Indian EV battery industry is set to take off with the penetration of Electric Vehicles (EVs) increasing. JP Morgan expects India’s auto segment to witness a transformative change in this decade, with fresh investments of at least $8-10bn in lithium-ion cell manufacturing.
“While we expect lead acid battery demand to grow at a low- to mid-single-digit CAGR this decade, we see about 30x EV Battery Increase in demand in FY22-26E, which should also be an opportunity for lead acid players. The Street’s caution on legacy players (sharp de-deriving of EXID/AMRJ) appears overdue for us, the global brokerage said in a note.
JPM launches coverage on Exide Industries shares with target price with overweight rating Neutral Rating on Amara Raja Batteries with Price Target of 210 570.
The brokerage believes that both Exide and Amara Raja should grow by the low- to mid-single digits this decade, while generating free cash. Plowing this back will help EV cell manufacturing and the ~30x/100x five-/ten-year EV battery pie should take a slice of the opportunity.
It prefers market leader Exide over Amara Raja for EV cell/battery manufacturing (nextcharge brand, partnership with SVOLT Energy), strong balance sheet (post-disinvestment of life insurance business) and better valuation.
“Regulatory support in the form of advanced cell chemistry PLI scheme and battery swapping policy augurs well for the growth of the battery value chain. The EV battery transition path in India may be different from other peers as legacy lead acid players are also participating. The EV revolution,” said analysts at JPMorgan.
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