IGI Logo

Strong performance on RAC and electronics

Amber Enterprises (AMBER) posted better-than-expected performance in 1QFY26. Revenue outperformance was driven by continued strong growth in consumer durables—particularly in RAC, despite weak demand faced by RAC players in 1QFY26— as well as sustained growth in the electronics division. AMBER is continuously increasing the share of components in RAC, adding more clients across the AC and overall consumer durables divisions, and focusing on increasing wallet share with clients. This, we believe, will offer sustainable growth in the consumer durable division, despite seasonality in RAC demand. With increased capex, acquisitions in niche electronics areas, and diversification across new segments in electronics, we expect strong growth in the electronics segment to continue. This momentum is expected to be further supported by the commissioning of the company’s capacity in JV with Korea Circuit. We expect the railway segment’s performance to remain subdued in the near term. We increase our estimates by 10%/12% each for FY26/27 to factor in 1QFY26 performance. Reiterate BUY with a revised TP of INR8,950 (INR7,700 earlier).

Outperformance in revenue, EBITDA, and PAT

AMBER posted a strong set of numbers with a beat across all parameters. Consolidated revenue grew 44% YoY to INR34.5b, beating our estimates by 35%, mainly due to higher-than-expected revenue in the consumer durables and electronics segments. Gross margins contracted 190bp YoY to 15.7% vs our estimate of 18.0%. Absolute EBITDA grew 31% YoY to INR2.6b, indicating a beat to our estimates by 29%, while margins contracted 80bp YoY to 7.4% vs our estimate of 7.8%. The company’s PAT at INR1b grew 44% YoY and beat our estimates by 52%. PAT margins stood at 3.0% vs our estimates of 2.7%.

Consumer durables outperform seasonal headwinds

The consumer durables segment’s revenue grew 33% YoY to INR25.6b in 1QFY26 despite a challenging season, outperforming the RAC industry. This was driven by: 1) a robust product mix across RAC, CAC, and components; 2) increasing wallet share; and 3) converting gas-charging customers to full ODM. Margin contracted 30bp YoY to 7.5%, mainly due to an increased share of finished goods in revenue. Commercial ACs scaled up sharply, aided by new launches (cassette, tower ACs) and a new MNC client set to contribute from 4QFY26 onwards. However, the company is reassessing its washing machine strategy due to the upcoming Quality Control Order (QCO), effective Oct’25, which would require substantial capex to meet compliance norms. While washing machines remain a long-term opportunity, AMBER is adopting a cautious approach, rightly prioritizing high-visibility and scalable segments like RAC and CAC, where margin profiles and growth dynamics are more favorable. With prudent capital allocation and continued product expansion, AMBER remains confident of outperforming the RAC industry by 10-12%. We, thus, expect a revenue CAGR of 19% over FY25-28, with margins remaining at around 8% over the same period.

Electronics segment to benefit from inorganic expansion and backward integration

AMBER’s electronics division posted a strong YoY growth of 97% in revenue during 1QFY26, reaching INR7.7b, backed by broad-based demand across PCBA and bare PCB segments. However, EBITDA grew 62%, indicating margin contraction despite strong top-line momentum. The key reason lies in the revenue mix, which remained skewed toward consumer durables, contributing 58-60% of the segment’s revenue. Since consumer appliance PCBA is typically a low-margin, high-volume business, this dilutes the division’s overall profitability, especially in 1Q, which is a seasonally strong quarter for durables. Management acknowledged this issue and outlined a shift in strategy to focus on reducing consumer durables’ share to 45% by FY26-end and ~25% over the next three years, while scaling high-margin verticals like automotive, telecom, defense electronics, power electronics, and smart meters. Importantly, acquisitions such as Power One Microsystems and Unitronics (both with 17%-20% range margins) are expected to further lift profitability as their integration ramps up. Additionally, backward integration through Ascent Circuits (MLPCBs) and the Korea Circuits JV (HDI/Flex PCBs) will offer AMBER greater value capture and cost efficiency. The company aims to reach USD1b in electronics revenue within three years, with EBITDA margins expanding to 11.5-12%. We expect the electronics segments’ revenue/EBITDA to clock a CAGR of 38%/58% over FY25- 28, with margins of 10.2%/10.9%/11.6% over FY26/27/28E.

Railways segment’s margin dip driven by metro mix, but structure remains intact

The railways segment reported revenue of INR1.2b (+29% YoY) and EBITDA of INR220m (+8% YoY), reflecting a margin contraction of 320bp YoY to 17.9%. The decline in margin was primarily due to a temporary change in the product mix, where a higher share of execution was for lower-margin projects such as metro and bus HVAC systems, compared to other parts of the portfolio, such as defense contracts, AMC services, and railway HVAC systems, where the margins are higher. Management expects some improvement in 2HFY26 as higher-margin segments like defense and AMC scale up. However, execution timelines and product ramp-ups (Yujin JV trials, Sidwal’s new plant) remain key monitorables. With margin normalization likely to be gradual and near-term pressures continuing, the segment’s contribution to overall profitability may remain limited in the short term. We expect the railways segment to post a revenue/EBITDA CAGR of 23%/23%, with a margin of 18.5% for FY26E-28E.

Financial outlook

We increase our estimates by 10%/12% each for FY26/27 to factor in 1QFY26 performance. We, thus, expect revenue/EBITDA/PAT to post a CAGR of 24%/32%/54% over FY25-28 for AMBER.

Valuation and recommendation

The stock currently trades at 69.1x/44.3x/30.6x P/E on FY26/27E/28E earnings. We increase our estimates and reiterate our BUY rating on the stock with a DCF-based TP of INR9,000 (earlier INR7,700).

Key risks and concerns

Key risks and concerns include lower-than-expected demand growth in the RAC industry; change in BEE norms making products costlier; change in announced capex policy; and increased competition across the RAC, mobility, and electronics segments.

For More Research Reports : Click Here 

For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412