Buy Amber Enterprises India Ltd For Target Rs. 7,261 By JM Financial Services
Mega plans for the future; maintain BUY
4Q was a good quarter for Amber, its revenue/EBITDA/PAT rising 34/33/23% YoY. This performance was aided by strong growth in the consumer durables and electronics business. The management’s increasing focus on pivoting its business towards becoming an integrated electronics company is clearly visible from the large capex and backward integration plans it announced, as it capitalizes on the electronics component PLI. Amber is planning a capex of INR 30bn spread over the next five years, to expand its electronics capabilities into complex PCB manufacturing, which should drive up its margins and insulate it from its heavy reliance on RAC manufacturing. As we factor in this capex, our FY27E EPS gets cut by 4% (despite an increase in EBITDA estimates), given an increase in finance costs and depreciation. We maintain BUY with a target price of INR 7,250 (vs. INR 7,470 earlier), based on our SoTP valuation, which implies a P/E multiple of 42x on Mar’27E EPS.
* 4Q a marginal beat on JMFe, but 14% miss on consensus: Amber’s 4Q revenue rose 34% YoY, and was 8/10% ahead of JMFL and consensus estimate. Gross margin at 16.6% was flat YoY and 80bps below estimate. Absolute EBITDA rose 33% YoY to INR 2.9bn, 9/3% ahead of JMFL and consensus.EBITDA margin at 7.9% was flat YoY, in-line with estimate and a 50bps miss on consensus. 4Q PAT at INR 1.2bn, +23% YoY was slightly ahead of our estimate or INR 1.1bn and a 14% miss on consensus estimate of INR 1.4bn.
* Strong show from consumer durables and electronics verticals: In 4Q the consumer durables business (RAC + RAC components + Non RAC components) registered a 27% YoY revenue growth and a 30bps improvement in margins to 8.4%, primarily driven by operating leverage benefits. The electronics business also reported a 74% YoY growth in revenues; however, EBITDA margins declined ~100bps YoY to 5.8%, given an inferior revenue mix. The railways subsystems business, on expected lines was muted, with 4Q revenues growing 1.5% YoY. Performance in this business, however was better compared to the last three quarters, wherein a YoY degrowth was witnessed.
* Consumer Durables – focus on market share gains: Amber saw good growth in the consumer durables business owing to tailwinds in the RAC industry, consequent to which it enjoyed a 26-27% market share in the outsourced manufacturing footprint. For FY26, management guided for a growth of ~30-32%,(+10-12% vs. industry growth of ~20%).
* Electronics – mega aspirations: For the electronics business, while FY25 was a good quarter, Amber has large aspirations in the form of backward integrating into complex PCB manufacturing. For this, it will participate in the recently annnounced components PLI and incur a capex of ~INR 30bn over the net 5 years. For FY26, the target is to grow revenues by 30-40%, while improving the revenue mix, which should take margins in this business up to 10-12% over the next two years from the current ~7%.
* Railway subsystems – revival on the way: For the railway subsystems business, FY25 was a weak year given lower than expected off take from clients. However, some positive movement is expected in FY26 and further in FY27 from the 200 Vande Bharat trains which were to be rolled out in FY25 but got delayed. Management target is to double revenues from this vertical in two years.
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SEBI Registration Number is INM000010361
