Buy Amber Enterprises India; target of Rs 5,010: Sharekhan

Sharekhan's research report on Amber Enterprises India

Q1 numbers were strong with a profit of Rs. 75 crore (up 60% y-o-y) that was in line with our estimates. Revenues grew by 41% y-o-y (Beats our estimates by 10%) led by RAC segment (+51%) driven by favourable peak summer demand. Operating profits rose by 49% y-o-y. Consolidated EBITDA grew by 49% to Rs 196 crore that drove margins to 8.2% (in line with our estimates). A 44% growth in consumer durables space was driven by RAC segment (up 51%) and Non-RAC segment (39%). JVs for washing machines is strengthening the Amber’s position in consumer durable Segment. Electronics segment grew by 45% led by Ascent’s consolidation. (ex-Ascent, growth is 18% y-o-y). Company has bagged new orders from aerospace and defence sectors.

Outlook

Amber is well placed to capture incremental demand accruing from components ecosystem development. Management remains optimistic about growth in components (including mobility, electronics, and non-RAC components), new customer additions as well as exports in the next 3-4 years. Further, traction in the high growth sectors such as railways could augur well. Moreover, in the long term, under penetration of RAC, rising temperatures in India, changing lifestyle patterns, and increasing contribution from Tier-II, Tier-III, IV cities would drive the RAC industry’s growth and benefit Amber indirectly, driving demand for its components. We build in a revenue/PAT CAGR of 27%/73% (FY2024- FY2026E). We maintain a Buy rating with a revised price target (PT) of Rs. 5,010 based on 40x of FY2026E EPS.