Emkay Global Financial recommended hold rating on Amber Enterprises with a target price of Rs 1225 in its research report dated June 01, 2020.
Emkay Global Financial's report on Escorts
Amber reported better-than-estimated performance, driven by volume growth in RACs vs our estimate of 10% decline. EBITDA was impacted by a forex loss of Rs160mn. Adjusting the same, EBITDA growth was 4.2% yoy. Realizations have been falling due to the changing product mix, with strong growth in Indoor Units. Operating performance across the subsidiaries was satisfactory, with margin improvement. Revenue growth of ILJIN was impacted by letting go of low-margin orders. We factor in a 17% fall in RAC volumes in FY21 and a strong rebound in FY22. Our estimates bake in Amber’s volume drop to be lower than the industry as we hope for incremental volume wins. Sidwal’s performance is expected to remain healthy in FY21.
Increased demand for domestic procurement of components could restrict revenue decline. As we have lowered our revenues, which leads to EPS cut of 17%/4% for FY21/22E. Maintain Hold, with a revised TP of Rs1,225 (20x PE on FY22).
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