Fundamental Analysis of High Energy Batteries: How important is electricity to the world? It has revolutionized many industries, and demand from emerging economies is ever-growing.
Electricity storage is critical in today’s competitive market, which benefits customers and creates healthy competition for manufacturers. In the Fundamental Analysis of High Energy Batteries, we analyze their business, industry landscape, financials, plans, and more.
Fundamental Analysis of High Energy Batteries.
The company was established in 1979. High Energy Batteries (India) Limited manufactures high-tech batteries mainly for the Army, Navy, and Air Force, as well as commercial batteries for auto and standby VRLA (value-regulated lead acid) application
The Research and Development department of the company assists in the design, development, and manufacturing of batteries – Silver Oxide Zinc, Nickel Cadmium, and Silver Chloride Magnesium – for applications such as underwater propulsion, control guidance, communication, emergency starting, and aerospace applications.
Segment Analysis
The company also exports products to various countries, with domestic revenue accounting for the majority of revenue in FY23. Its revenue is made up of 65% Navy and Navy Research Labs, 6% DRDO Labs, 17% Defence Public Sector, and the remaining 12% Aerospace and others.
The major customer is the Indian government’s defense ministry, where silver-zinc batteries are supplied the most and account for the majority of the revenue segment.
Industry Analysis
The Indian defense industry is one of the largest in the world. The Ministry of Defence has set a target of achieving a turnover of US $25 million in aerospace and defense manufacturing by 2025, which includes US $5 billion in exports.
The FDI for the industry has been raised from 49% to 74% allowing foreign institutions with higher ownership and control.
By 2024-25, the government hopes to achieve defense manufacturing worth Rs. 1,75,000 crore (US $21.14 billion), including defense exports worth Rs. 35,000 crore (US $4.22 billion).
By 2025, the Ministry of Defense has set a target to see US $25 million in aerospace and defense industry revenue, including US $5 billion in exports.
Financials – High Energy Batteries
| Financial Year | Revenue (Cr.) | Net Profits (Cr.) |
|---|---|---|
| 2022-23 | ₹ 92.53 | ₹ 20.49 |
| 2021-22 | ₹ 79.25 | ₹ 17.94 |
| 2020-21 | ₹ 77.52 | ₹ 18.32 |
| 2019-20 | ₹ 61.16 | ₹ 5.60 |
| 2018-19 | ₹ 45.85 | ₹ 0.43 |
| CAGR (4 Years) | 18.92% | 111.47% |
Revenue and Net Profit
The company reported Rs. 92.53 crore in FY23, a 16.75% increase over Rs. 79.25 crore in FY22. Revenue increased due to strong sales growth, and the CAGR was 18.92%.
Net profits for FY23 were Rs. 20.49 crore, up 14.21% from Rs. 17.94 crore in FY22. The increase in net profits is due to increased sales and a higher operating margin, with a CAGR of 111.47%.
Profit Margins
The OPM stood at 34% in FY23 as compared to 37% in FY22, a decrease of 8.10%. The decrease in margin is due to an increase in fixed costs such as raw material costs and employee costs, which caused a YoY contraction. The average over 5 years stood at 28.37%
NPM for FY23 was 30% as compared to 31% in FY22, a decrease of 3.22%. The margin decline is due to a consistent decline in operating margins from FY21 to FY23, following a surge from FY20 to FY21. The average stood at 18.92% over 5 years.
| Financial Year | OPM (%) | NPM (%) |
|---|---|---|
| 2022-23 | 34.00% | 30.00% |
| 2021-22 | 37.00% | 31.00% |
| 2020-21 | 38.50% | 23.55% |
| 2019-20 | 16.91% | 9.11% |
| 2018-19 | 15.44% | 0.94% |
| Average (5 Years) | 28.37% | 18.92% |
Return Ratios
The RoE stood at 32.26% in FY23 as compared to 37.43% in FY22. The 13.81% decrease is due to a dip in net profit margin and an increase in reserves.
RoCE was 35.10% in FY23 compared to 36.38% in FY22, a 3.51% decrease due to lower profits. However, the RoCE has higher returns than the RoE, indicating better debt utilization.
| Financial Year | RoE (%) | RoCE (%) |
|---|---|---|
| 2022-23 | 32.26% | 35.10% |
| 2021-22 | 37.43% | 36.38% |
| 2020-21 | 55.80% | 43.84% |
| 2019-20 | 26.44% | 25.42% |
| 2018-19 | 2.37% | 10.53% |
| Average (5 Years) | 30.86% | 30.25% |
Debt Analysis
The debt-to-equity ratio stood at an all-time low of 0.29 in FY23 as compared to 0.45 in FY22. The average over 5 years stood at 1. The debt reduction can help strengthen the financials of the company significantly.
In FY23, the interest coverage ratio was a comfortable 8.83 times, up from 7.38 times in FY22. The improvement in the ratio is due to debt reduction and low-interest payments, which will eventually help the company improve its cash flows and invest in capex if necessary.
Fundamental Analysis of High Energy Batteries – Key Metrics
Let us look at some of the Key Metrics of High Energy Batteries (India) Ltd.
Future Plans
- The company is looking to expand its product mix by venturing into fuel cells and flow batteries, which are used in vanadium redox flow batteries (VRFB) for power generation using hydrogen and bulk energy storage applications.
- The company plans to focus on products that create additional benefits and features, in particular areas in battery and power pack system integration. This move might make a stronger presence in both defense and non-defense markets in India. This move might help to broaden its customer base as well.
- The huge capex planned by the Government of India might provide huge opportunities in high-order flows for the company from the private sector.
As we near the conclusion of the article, we will take a brief look at High Energy Batteries. The company manufactures batteries for the army, and the costs of materials such as silver, zinc, and copper fluctuate due to demand and supply issues. The army’s order flow puts the majority of its revenue at risk.
Critical Components in the Fundamental Analysis of High Energy Batteries : A Detailed Examination
Key Components of High Energy Batteries: High energy batteries comprise several key components that contribute to their superior performance. Understanding these components is crucial for a thorough analysis.
- Cathode and Anode Materials in the Fundamental Analysis of High Energy Batteries: A Deep Dive Cathode Materials : High energy batteries often utilize advanced cathode materials, such as lithium cobalt oxide (LiCoO2) or nickel manganese cobalt oxide (NMC). These materials play a pivotal role in determining the battery’s energy density and overall efficiency.
- Anode Materials: The choice of anode materials is equally significant. Materials like graphite and lithium titanate are commonly employed in high energy batteries to enhance their energy storage capabilities.
- Electrolytes and Conductivity: Examining Key Aspects in Fundamental Analysis : Electrolytes serve as the conductive medium between the cathode and anode, facilitating the movement of ions within the battery. Innovations in electrolyte formulations contribute to improved battery performance and safety.
- Separator Technology: Safeguarding Stability in Fundamental Analysis of High Energy Batteries: The separator prevents short circuits within the battery by keeping the cathode and anode physically separated. Advances in separator technology enhance the overall stability and safety of high energy batteries.
- Solid-State Battery Revolution: Future Implications for Fundamental Analysis
- Integration with Renewable Energy: A Sustainable Perspective in Fundamental Analysis
- Electric Vehicles and Fundamental Analysis of High Energy Batteries: Driving Industry Insights
- Market Perspectives in the Fundamental Analysis of High Energy Battery Investments
Future Plans in High Energy Battery Technology:
1. Advanced Materials Research: Ongoing research in high energy battery technology focuses on the development of novel materials with enhanced energy storage properties. Scientists are exploring alternatives to traditional cathode and anode materials to improve overall performance and longevity.
2. Solid-State Battery Technology: The future of high energy batteries lies in solid-state technology. Solid-state batteries replace traditional liquid electrolytes with solid conductive materials, offering improved safety, energy density, and cycle life. Research and development in this area aim to overcome existing challenges and bring solid-state batteries to commercial viability.
3. Integration with Renewable Energy Systems: High energy batteries play a crucial role in renewable energy integration, enabling efficient energy storage for unpredictable renewable sources like solar and wind. Future plans involve optimizing the synergy between high energy batteries and renewable energy systems to create sustainable and reliable power solutions.
4. Electric Vehicle Advancements: The automotive industry is witnessing a paradigm shift towards electric vehicles (EVs), and high energy batteries are at the forefront of this transformation. Future plans involve increasing the energy density of batteries to extend the range of EVs and accelerate the adoption of electric transportation.
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