Add Amber Enterprises Ltd For Target Rs 4,908 By Yes Securities
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Result Synopsis
AMBER’s Q1FY25 performance was in line with slight miss on the margin. Strong revenue growth was on back of favorable summer demand, while strategy of increasing mix of components resulted in EBITDA margin expansion. Expansion of product portfolio like Tower Air conditioners, Window Top Throw Inverter Series, Tropical high efficiency split air conditioners and Cassette Air Conditioners led to growth in RAC. On the electronics side diversification into new business of defense, aerospace Auto and consumer electronics has resulted in strong growth. Considering strong growth prospects and current order-book management has increased the revenue growth guidance upwards in the electronics division from 35% to 45%. Management is confident of strong revenue growth in medium term on huge import substitution opportunities and expectation of the component PLI scheme from the government. Our FY25 and FY26 revenue estimates have been upgraded by 2.3% and 4.7% respectively, with EBITDA estimates increasing in the similar proportion. We upgrade the stock to ADD with PT of Rs4,908 valuing it at 42X FY26 EPS. There are multiple levers for the growth and company has made significant investments in components and Railways which will drive future growth.
We believe AMBER’s focus on enhancing its capabilities on the components side, its JV with Titagarh wagons for railways will bode well for the company. Further, acquisition of Asccent circuit will result in increased PCBA manufacturing for the electronics universe. We now estimate Amber’s Revenue/EBITDA/PAT to grow at 25%/32%/68% CAGR over FY24-26E
Result Highlights
* Quarter summary – Amber delivered in line performance with the slight miss on the margin front. Revenue growth stood at 41% aided by favorable summer season coupled with new products and customer addition.
* Margins – Gross margins and EBITDA margins have seen improvement of 30bps and 42bps respectively on yoy basis Gross margin at 17.8% has been higher both on yoy and sequential basis on better revenue mix.
* Guidance –Management is guiding strong 25% revenue growth for the company on consolidated basis, while electronics segment is expected to now grow at 45% vs the earlier expectation of ~35%. Margins are expected to improve on better revenue mix.
* Return ratio – The company expected return ratios to move higher and is expecting RoCE to improve by 300bps and in longer run it expects RoCE to move towards 19%.
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SEBI Registration number is INZ000185632.
