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Strong Q3 led by all-round growth

Amber Enterprises (AMBER IN) saw a robust Q3 performance, as positive growth momentum was witnessed across segments, with electronics outperforming. Despite a muted room air conditioner (RAC) season for the industry, AMBER saw healthy volume growth on account of channel filling before BEE price rises. The favorable product mix also led to EBITDA margin expanding to 8.4%. We raise our TP to INR 9,625 on 50x December FY27E P/E after factoring in higher sales on better-than-expected RAC demand in 9MFY26 and expectations of robust Summer demand, as well as incorporating Shogini Technoarts financials. We reiterate Buy as AMBER is becoming a diversified Electronics Manufacturing Services (EMS) firm with strong tailwinds and large capex for Printed Circuit Board (PCB), providing revenue visibility. The stock has underperformed the Nifty by 10% in the past six months.

Robust RAC demand drives the consumer durables segment: Q3FY26 sales surged 38% YoY to INR 29.4bn, primarily led by the consumer durables and electronics segments. Consumer durables grew 27% YoY, led by healthy RAC demand ahead of BEE price rise. During Q3, ~60% of consumer durables sales was from RAC finished goods, and 20% each from RAC components & non-RAC components. Management expects consumer durables to grow 13-15% YoY in FY26. Rising commodity prices are a pass-through for AMBER subject to a delay of one quarter, with an impact of 0.25-0.50% on margin, due to price rises.                

Electronics outperforms in Q3: The electronics segment sales spiked 79% YoY to INR 8.4bn, led by strong sectoral tailwinds propelling demand for Ascent Circuits and Il Jin, along with its new acquisition Shogini Technoarts consolidated for one month. Management sees robust visibility for Power One Microsystems and Unitronics in the upcoming years by supplying PCB, PCBA and injection moulding to these companies, which are currently being procured through other vendors. The two acquisitions have an addressable TAM of USD 6.5bn, as per management. The new acquisition of Shogini Technoarts bolsters the PCB portfolio of AMBER and provides robust visibility on top line and bottom line. On the pricing front, due to the surge in prices of copper clad laminates, a 5% impact is likely for PCB; however, this is set to be passed on to clients with a lag of 1.0-1.5 quarters.

Margins expands on product mix: Consumer durables inched up 10bp YoY to 7.1%, due to robust RAC demand, while electronics margin spiked 280bp YoY to 10.2%, due to product mix. Mobility margin expanded 250bp YoY to 14%. Management expects to reach double-digit margin in the electronics segment by FY27.    

Reiterate Buy with a higher TP of INR 9,625: We raise our FY26E EPS by 13%, FY27E EPS by 19% and FY28E EPS by 6% based on better-than-expected demand in RAC in 9MFY26 and expectations of a robust Summer demand. We incorporate financials of new acquisition of Shogini Technoarts. We raise our TP to INR 9,625 from INR 8,460 on 50x (from 52x) December FY27E P/E, due to strong growth in electronics and rebound in railways segments. We reiterate Buy as AMBER is a diversified EMS firm, with strong sectoral tailwinds and large capex toward high-margin PCB. The stock has underperformed the Nifty by 10% in the past six months. We expect an earnings CAGR of 35% during FY25-28E, with an average ROE of 14% during FY26-28E.

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