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Amber Enterprises’ (Amber) 2QFY24 results were below estimates led largely by lower revenue in a seasonally weak qtr. Net sales grew by 24% YoY to INR9.3bn (JMFe: INR9.8bn), EBITDA grew 63%YoY to INR596mn (JMFe: INR665mn) with net loss at INR69mn (JMFe: (-) INR 24mn). EBITDA margin came in at 6.4% (+150bps; JMFe: 6.8%). While FY24 growth outlook for the RAC industry is subdued (<10%), channel inventories getting normalised improves outlook for 2H. Growth outlook for the mobility and electronics divisions remains robust (FY24E: 25-35%) with guidance of doubling their revenues by FY26 over FY24E base. Diversifications into components add to stability in the durables segment while greater thrust on the electronics and mobility segments should reduce earnings seasonality and aid growth. We estimate robust revenue/EPS CAGR of 19%/39% for Amber over FY23-26E. Maintain Buy with revised PT of INR 3,215 based on 30x Sept-25 EPS (30x FY25E EPS earlier).

* Consumer durables (RAC, components & motors) and Mobility segments perform well: Consolidated net sales grew by 23.5% YoY to INR 9.3bn, with 35% YoY growth in the consumer durables segment to INR 5.5bn and 25.7%YoY growth in the mobility segment to INR1.3bn. Share of RAC finished goods stood at 40% of revenue. Electronics segment growth was muted at 3% YoY to INR2.5bn but is likely to pick-up materially going ahead.

*Margins continue to improve: Gross margins improved to 22.3% vs 21.1% in 2QFY23 and 17.5% in 1QFY24 largely on account of lower RM costs and greater focus on components within the RAC segment leading to improved product mix. EBITDA margins stood at 6.4%, up 150ps YoY, backed by higher gross margins and operating leverage. Depreciation grew 42.2% YoY to INR 452mn on account of elevated Capex spends (FY24E: INR 3.5-3.8bn) and finance costs increased due to higher debt and increased borrowing costs. Net loss for the 2QFY24 stood at INR69mn.

*Strong growth guidance for Mobility and Electronics; NWC levels to normalise: Revenue growth guidance for FY24 remains strong for Mobility/Electronics segments at 25%/35%. Amber has guided for doubling the revenue in both these segments by FY26 (on FY24 base) led by new product additions. The RAC segment remains subdued and is likely to grow at single digit in FY24. However, channel inventories have normalised and primary sales are expected to pick-up with the onset of the current festive season. Management however indicated a surplus capacity situation in the RAC industry over next 2-3 years. NWC was higher at 52 days in Sept-23 as against 39 days in Sept-22 due to unwinding of payables and liabilities and have been guided to normalise at 20-25 days by Mar-24.

* Maintain BUY; with revised TP of INR3,215: We forecast sales/EPS CAGR of 19%/39% over FY23-26E, as we expect strong ramp up in the electronics and mobility segments leading to improved capacity utilisation and operating leverage. With earnings growth being a key driver, we expect ROE to improve to 16.3% by FY26E as compared to a modest 8.2% in FY23. The stock trades at 31.2x/22.3x FY25E/FY26E EPS. Maintain BUY with a revised TP of INR 3,215 as we roll forward to 30x Sept’25E EPS of INR 107 from 30x Mar’25 EPS earlier.

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