Shares of Amara Raja Energy & Mobility gained 3.15% to Rs 1,000.80 on Wednesday after the automotive battery maker reported strong financial performance for the June quarter and received revised target prices from brokerages.

The company reported consolidated net profit of Rs 191 crore for Q1 FY27, compared with Rs 165 crore in the corresponding quarter last year, marking a 15.8% year on year increase. Consolidated revenue from operations rose 24% year on year to Rs 4,214.5 crore from Rs 3,401 crore.

Consolidated EBITDA increased 11.7% to Rs 405.9 crore from Rs 363.5 crore a year earlier. However, EBITDA margin contracted to 9.6% from 10.7%, indicating pressure on operating profitability despite strong revenue growth.

The lead acid batteries and allied products business remained the company's largest revenue contributor, with segment revenue rising to Rs 4,005.24 crore from Rs 3,279.79 crore in the year ago quarter. Revenue from the new energy business also increased significantly to Rs 209.30 crore from Rs 121.29 crore.

Nomura maintained its Neutral rating on Amara Raja while raising its target price to Rs 1,048 from Rs 942. The brokerage said first quarter margins were below expectations but expects profitability in the lead acid business to improve going forward. It raised its FY27 and FY28 revenue estimates by 7% and 9%, respectively, while maintaining EBITDA margin estimates of 11.6%, 11.8% and 12.0% for FY27, FY28 and FY29.

Nomura also highlighted risks from increased capital allocation towards lithium ion and other new energy businesses. While these businesses provide long term growth opportunities, competition from low cost Chinese imports and intense competition could constrain profitability and capacity utilisation.

JPMorgan also raised its target price on Amara Raja to Rs 1,070 from Rs 985. The brokerage attributed the margin pressure during the quarter to higher brand promotion expenses, increased warranty provisioning, manufacturing upgrade expenses and elevated freight and fuel costs. JPMorgan expects some of these cost pressures to persist in the near term before gradually normalising.

The brokerage also viewed the company's battery energy storage systems plans positively. Amara Raja is expected to begin operations at its 5 GWh facility in Q3 FY27, with the company currently prioritising energy storage system cells over standard electric vehicle cells.

The key monitorable for investors remains the pace of margin recovery in the core lead acid business and the ability of the company's new energy investments to generate adequate returns as capacity scales up.