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Strong growth opportunities ahead; maintain BUY

Result Synopsis

AMBER delivered marginally better than expected revenue growth while missing the margin estimates on back of higher operating expenses which were marred by forex loss to the tune of Rs66mn. RAC industry was subdued for the quarter as there was some de?stocking by the channel owing to change in BEE rating and higher than expected rainfall in north impacted secondary sales. On the components front, its electronics division has registered strong growth on back of supply to Boat and addition of new customer in wearables and hearables category. Motor division is also witnessing improved traction in terms of exports and company has already registered exports revenue of Rs290mn and has orders worth Rs500mn. Company is expecting large export order in FY24. Management is targeting to maintain its value market share at around 26% and improve upon it. Considering strong growth potential and enhanced capabilities in existing business this coupled with increased traction in new businesses like wearables and hearables coupled with opportunities in exports should drive revenue in medium term. we continue to maintain our positive stance; increased capex spends, and lower profitability will impact its return rations in near term; however, management is confident of improving RoCE by 200bps each in next couple of years. We maintain BUY on the stock with PT of Rs2614.

We believe AMBER’s focus on enhancing its capabilities on components augurs well for the future with multiple brands setting up own manufacturing.  Further, entry into newer segments of wearables and hearables will give further boost to the revenues. Exports, increasing in portfolio of commercial air?conditioners and manufacturing under PLI scheme will further boost revenue visibility and improve utilization in lean season boosting operational efficiencies. We have trimmed our margin estimated considering lower profitability and now estimate Amber’s Revenue/EBITDA/PAT to grow at 27%/41%/59% CAGR over FY22?24E. We continue with our positive stance on stock; and upgrade the stock to BUY with PT of Rs2,614 based on 32x FY24E.

Result Highlights

* Quarter summary – Amber delivered in?line performance with components side of the business delivering far superior growth on back of new customer additions and entry into new product categories. Forex loss has resulted in lower than expected operating margins.

* RAC Industry – RAC industry was subdued during the quarter as there was channel de? stocking on account of change in BEE rating from July and incessant rainfall activity in month of July and August in northern part of India.

* Subsidiaries – Performance of subsidiaries continues to witness strong improvement. Now with PLI scheme, company expects subsidiaries to see significant traction as they have been able to develop component ecosystem. Revenues of subsidiaries are expected to grow at 25?30% CAGR in medium term.

* Capex – Capex has increased its capex guidance to Rs60bn in FY23 from earlier Rs40bn as company is increasing the capacities and increasing the product offering to cater to new customers and segments.

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