Viviek,
yield is pathetic because things have changed for better recently for the company. You are right about fluctuation in EPS. I will explain there things further. But I dont agree with you that management is not confident abt. future. In fact they are very confident.
Basant,
Thanks for nice writeup. I know I dont write good and may be I am lazy too.
I think Amararaja is misunderstood company. There was some speculative activity in this company at time of KP, may be he was involved with that. But company pays good amt of tax and they never came with rights issue so I am least worried abt moral part. Company is BV of 175+ without rights premium. Every ruppee they have earned after tax and company is not really very old.
Company started with maintenance free industrial battery. Performed good. They they added automative batteried and that was tought nut to crack. It required brand. So this is reason for fluctuation in EPS. But now they have established themselves in automative segment and I see better future.
Company used have more payout on dividend but recently they have been adding capacity agressively and they dont dilute equity so less dividend. Company had capacity of 1m batteries in sept 2001 and will have capacity of 5.4m in mid 2007, without diluation.
What I m looking for in this company is replacement cycle. Auto boom started in 2003. That replacement cycle should start anytime now so even if auto industry doesn't grow, replacement will keep on going up. There much more money to be made on replacement batteries. If somebody is buying 200,000 batteries, they will negotiate to tooth and nail. They know cost of everything. Replacement is where they make nice profit.
They have started concenpt of pit stop. They collect your old battery for some money and then recycle lead. Brilliant idea.
Now they got the scale I think company is in sweet spot.
Amararaja started supplying to OEM so replacement they will get preference too.
Parent company of EXIDE is truggling hardly. Partner of Amararaja is very strong. This will help in future.
Higher energy price should help battrery mkt. Where ever you use solar, you need battery. Hybrid/electric cars will need bigger batteries.