Charge Your Portfolio with the Best EV Battery Stocks in 2024

The demand for electric vehicles (EVs) in India is gaining momentum.

According to the Vahan Dashboard, in the calendar year 2023, the registration of EVs was 1.4 million year-to-date (YTD). This is 37% higher compared to CY22.

This surge is attributed to the government's push towards low-emission avenues to achieve its target to become net carbon zero.

This in turn, has become a catalyst for increased demand for EV batteries.

Rising Demand of Electric Vehicles

In November 2021, India announced its target to achieve net zero by 2070. Climate change is not a new phenomenon, but a lot of countries are witnessing its impact in present times.

India is facing some of the extreme issues like heat waves, floods, drought, and declining groundwater reserves. These issues have not just affected people's health but also affected the gross domestic product (GDP).

The recent drop in the air quality index of prominent Indian cities like Delhi and Mumbai has also led the government to take actionable steps towards climate change.

At the recent G20 Summit, all the G20 countries showed their commitment to triple global renewable energy capacity by 2030. This is a step further to ensure the fight against climate change.

India to Embrace the Growth in the EV Market

Government initiatives like the faster adoption and manufacturing of electric vehicles (FAME) scheme is a step towards the adoption of EVs in India.

In addition to this, the government offers tax benefits to hybrid and electric vehicles.

According to Mordor Intelligence's report, the EV market in India is estimated to reach US$ 37.7 billion by 2028. This translates to a compounded annual growth rate (CAGR) of 46.4% from 2023 to 2028.

According to reports, the second phase of FAME has already allocated Rs 100 billion (bn) for customer incentives.

On the other hand, the production-linked incentive (PLI) scheme allocated Rs 260 billion to the automotive industry for sourcing and producing vehicles locally in India.

These efforts are indeed helping India to become the primary hub for EV production around the globe.

Around 70% of Indian car consumers in tier-one cities prefer an electric car as their next vehicle, above the global average of 52%, says McKinsey & Company.

Top EV Battery Makers to Watch Out in 2024

#1 Amara Raja Energy & Mobility

Amara Raja Energy & Mobility is one of the largest manufacturers of lead-acid batteries for both industrial and automotive applications in India.

The company also exports to over 50 countries across the globe and is focused on expanding its footprint to more countries. The company owns flagship brands like Amaron and PowerZone.

These brands are said to have a strong recall in the domestic market. The company has 7 manufacturing facilities located in Andhra Pradesh, four of which have been recognised with gold in international-level quality circle competitions (ICQCC) held in Jakarta, Indonesia.

As of 6th December 2023, the stock price of Amara Raja Energy & Mobility is near its 2-year high of Rs 770.

Being a prominent player in the lead acid business, automobiles contribute approximately 68%, industrial contributes 30%, while others contribute 2% of its revenue.

The company has consistently recorded better earnings before interest, tax, depreciation, and amortisation (EBITDA) margins compared to its listed peers.

The last 10-year average EBITDA margins of the company stand at approximately 15%, while the average of peers is at approximately 13%.

In the recent past, the company has entered into an MoU with the Government of Telangana for setting up the lithium-ion (Li-ion) Battery Gigafactory.

This facility will have a cell manufacturing capacity of up to 16 gigawatt hours (GWh) and the assembly capacity will be up to 5 GWh.

The company is planning to invest around Rs 95 bn over the next 10 years.

The first phase would involve setting up of a 2GwH capacity Li-ion cell plant at a capex outlay of approximately Rs 12 bn. This is likely to be operational in the next 2-3 years.

#2 Exide Industries

Exide Industries is one of the leading manufacturers and distributors of lead-acid batteries and storage solutions.

The company is strengthening its market share in lead-acid batteries and storage solutions across both automotive and industrial sectors. Additionally, the company is also expanding its capabilities of Li-Ion batteries.

Exide Industries share price fell to a low of Rs 136 in mid-June 2022. Currently, it's trading at 291. In the last 1 year, this stock has delivered a return of 54.8%.

The core segment of the company witnessed solid growth over the last two years. This was due to increased demand.

Currently, the battery segment is witnessing a big technological shift.

The company is committed to investing Rs 60 bn in a phased manner in a 12 GWh Li-Ion cell plant to leverage future demand from EV the segment.

The company is likely to benefit from the automotive segment if:

• It holds the leadership position in the growing OEM and aftermarket segment.
• Launches new and advanced products for new applications.
• It expands its network in Indian aftermarket and export markets.

The industrial segment will benefit if:

• The demand picks up, primarily driven by government and private capex.
• The company continues with increased investment in renewable energy.

Due to double-digit growth across segments with the industrial segment outperforming, the company saw a revenue growth of 17.6% YoY in FY23.

However, the margins were impacted in FY23 due to higher commodity prices.

#3 Kabra Extrusion Technik Ltd

Kabra Extrusion Technik is one of India's premier manufacturers and exporters of plastic extrusion plants.

The company enjoys a leadership position in the extrusion market having a presence in more than 100 countries across the world.

Battrixx is the future technologies division of the company.

It has developed its flagship product around advanced Li-Ion battery packs and modules for EVs.

The extrusion segment contributes 47%, while Battrixx contributes 52% of the company's revenue as of the first half of FY24 (H1 FY24).

After achieving an all-time high of 621.85 in mid-February 2023, this stock corrected around 33%. The stock is currently trading at 419.20 as of 6th December 2023. It has corrected approximately 16% in the past 3 months.

This fall is due to the contraction in the EBITDA and profit after tax (PAT) margins. In H1 FY24, the EBITDA margins of the company contracted 15.9% year-on-year (YoY). PAT margins, on the other hand, contracted 16.4% YoY.

This fall was primarily due to higher operating and finance costs. Revenue, on the flip side, jumped 10.8% YoY to Rs 3,160 million (m) in H1 FY24.

The extrusion machinery segment predominantly contributed to this jump as its revenue surged by 18.3% YoY to Rs 1,516 m.

Battrixx's revenues grew just by 5.7% YoY to Rs 1,680 m.

However, the company expects demand recovery owing to the festive season along with the new launches by the OEMs.

As the EV battery segment is expected to grow to US$ 27.7 bn in the next 5 years, the company can also participate in this growth story.

However, the company needs to ensure the right product mix and contain the operational and finance costs.

#4 Neogen Chemicals Ltd

Neogen Chemicals has been operating since 1991 and is one of the leading manufacturers of Bromine and lithium-based speciality chemicals.

The company has been the largest importer of Lithium Carbonate and Lithium Hydroxide for the last 3 decades. Therefore, it has a strong relationship with leading lithium miners and processors across the globe.

Although this company does not directly manufacture EV batteries, it acts as one of the leading raw material suppliers of battery chemicals such as electrolyte and lithium electrolyte salts.

The stock price of Neogen Chemicals jumped from Rs 263.55 in May 2019 to 1,516.55 as of 6th December 2023, clocking a CAGR of 47.5% in four and a half years.

After achieving an all-time high of Rs 1,907 in January 2022, the stock struggled to surpass this level. Currently, it is trading near its September 2022 highs.

As per the company's recent earnings call, it is planning to set up an electrolyte plant with 30,000 kilo tonnes per annum (KTPA) capacity. Earlier the same was at 10,000 KTPA.

Furthermore, the company will also set up 4,000 tonnes per annum (TPA) which earlier was 1,000 TPA of lithium salt capacity units.

Moreover, the company is quite certain that they will start getting orders from 3 to 4 battery manufacturers in CY24. These manufacturers are said to set up approximately 0.5 gigawatts (GW) to 1 GW capacity.

One of its international customers is waiting for its production line to stabilise, post which they will start taking the material (electrolyte).

The company's management is confident about the robust demand for electrolytes for its MU Ionic Solutions Corporation (MUIS), Japan-based capacity.

Management's demand assessment is based on:

• Large projects under implementation to set up GW capacities in India by CY25.
• Number of enquiries the company is getting for electrolytes from domestic and overseas customers.
• Developing nations are looking for non-China-based suppliers for electrolyte salts.

#5 HBL Power Systems Ltd

HBL Power System was incorporated in 1983 to manufacture and service different types of batteries, e-mobility, and other products.

The business strategy of the company is to identify technology gaps in India and fill them via their intellectual capital.

The company focuses on creating technology solutions that address challenging applications for key user sectors such as telecom, UPS, railways, power, oil & gas, industries, and defence.

HBL Power has seen robust growth in the last 5 years. The stock price of the company went up from Rs 25.75 in December 2018 to Rs 390.65 as of 6th December 2023. This translates to a CAGR of 83% in 5 years.

This price rise has been supported by its strong financials. Over the last 5 years, the company's PAT has grown at a CAGR of 29.6%, versus the industry average of 4.8%.

In the second quarter of FY24, the company's net profit jumped 2.5 times on a YoY basis.

India not just imports Li-ion cells, but also imports motors and controllers for most EVs that are made in India.

The company has been investing in the in-house development of all the technology parts for motors and controllers since 2017.

Moreover, it also plans to test the products on the highways in 2024. HBL Power plans to convert old diesel highway trucks to electric drive using their in-house manufactured motors and batteries.

The sales may begin to kick in from FY25. Though there are a large number of old trucks, the company's solution will only be suitable for a few of them.

The management has said that there's huge scope in this space. At present, there are no competitors as there is no subsidy for electric trucks.

Snapshot of Top EV Battery Stocks on Equitymaster's Stock Screener

Apart from above, here's a list of top EV battery stocks on Equitymaster's stock screener.

Please note these parameters can be changed according to your selection criteria.

Since you're interested in EVs, check out Equitymaster's stock screener which has a separate section for electric vehicle stocks.

Meanwhile, more and more companies are likely to join the EV battery race, so be on the lookout as those companies will have an early mover advantage.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...