Buy Amber Enterprises India Ltd For Target Rs. 9,375 by Prabhudas Liladhar Capital Ltd
Smartphone Foray Opens a New Growth Avenue
Amber Enterprises hosted a business update call to discuss its manufacturing collaboration agreement with OPPO Mobiles India, wherein management outlined its strategic entry into the smartphone manufacturing segment while highlighting its focus on strengthening backward integration and expanding its presence across the electronics manufacturing ecosystem. Management indicated that the smartphone business will initially focus on assembly and SMT operations, with a phased roadmap to move into HDI PCBs and component manufacturing over the next 3–5 years. The company expects trial production to commence in Q4FY27, with commercial production from Apr'27 and volumes scaling from 8-9mn units in the first year (FY28) to 14–15mn units in the second year (FY29). While smartphone manufacturing is expected to be a high-volume, low-margin business with EBITDA margins of ~1.5–2.0%, management believes the segment can generate attractive RoCE of 30–35% supported by high asset turns, low working capital requirements and increasing localization.
We have incorporated the mobile business contribution in our FY28 estimates, which has increased our FY28 EPS estimate by ~10%, We estimate revenue/EBITDA/PAT CAGR of 42.3%/33.1%/80.7% over FY26-28E with EBITDA margin contracting by ~100bps to reach 6.8% by FY28E. Maintained ‘BUY’ rating and SOTP-based TP of INR 9,375 (Earlier INR 8,396) valuing its Consumer Durables segment (including Mobile business) at 23x EV/EBITDA Mar’28, which implies 21x EV/EBITDA Mar’28E and 47x Mar’28E earnings on consolidated basis.
Key Takeaways:
* Amber Enterprises has entered into a manufacturing collaboration agreement with Oppo India for the production of smartphones under the Oppo, OnePlus and Realme brands in India, marking its entry into the smartphone manufacturing segment and expanding its consumer electronics portfolio.
* Manufacturing will be undertaken through an existing OPPO facility under a sublease arrangement, resulting in a highly asset-light entry into mobile phone manufacturing. Management clarified that no Press Note 3 approval is required under the current structure.
* Company will leverage its manufacturing scale, operational capabilities and domestic supply-chain ecosystem, while Oppo India will provide product expertise, technology support and quality standards.
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