Diet Report - Amber Enterprises - Amber dials Oppo to enter mobile by Elara Capital
Amber Enterprises (AMBER IN), which is focused on room air conditioners (RAC) manufacturing, Printed Circuit Board (PCB) manufacturing & PCB Assembly (PCBA) and railway components, has announced a foray into mobile manufacturing and assembly in collaboration with Oppo India. Oppo India is the licensed manufacturer for Oppo, Realme, and Oneplus. Based on market data and our assumptions, we expect incremental PAT of INR 416-831mn and a market cap of INR 21-42bn with an additional upside of 7-14%, assuming volume share of 5-10% of overall volume for the three brands. We await details on the investment, volume, and brands offering, price, margin, pending approval of Press Note 3 (PN3), if any, and other contours of the agreement. We reiterate Buy with a TP of INR 8,630
Collaboration with Oppo India for mobiles:
AMBER has announced an agreement to manufacture mobiles, which is a significant step as it is currently only involved in RAC, PCB & PCBA and railway HVAC manufacturing. India’s mobile industry saw volume sales of 152mn in CY25 (Source: IDC). Out of this, Oppo with its three brands cumulatively holds a market share of 25-27% (Oppo at 13.5-16%, Realme at 8.5-9.5%, and Oneplus at 1.5-2.0%). This presents a total addressable market (TAM) of 39-41mn units. Out of this, Dixon Technologies (DIXON IN, Accumulate, CMP: INR 12,410, TP; INR: 12,375), Bhagwati Products, and DBG India (China brand) are already involved in manufacturing and assembly for Oppo brands. Thus, there could be negative impact on Dixon Technologies or Bhagwati Products as volume may reduce.
Incremental PAT potential of INR 416-831mn; market capitalization of INR 21-42bn:
We expect AMBER to initially cater to 5-10% of Oppo brands cumulative volume (await details on volume and price). This presents a mobile volume potential between 2.1mn at 5% and 4.1mn at 10%, with a sales potential of INR 27.7bn and INR 55.4bn, respectively. Assuming a PAT margin of 1.5% (similar to Bhagwati Products), this could result in incremental PAT potential between INR 416mn at 5% and 831mn at 10%. At 46-50x FY28E P/E, this may result in incremental market capitalization potential of INR 19.1-20.8bn at a 5% share and INR 38.3-41.6bn at a 10% share. Thus, incremental upside to market cap would be 7-14%.
Mobile manufacturing is high ROCE, but low-margin business:
Contrary to AMBER’s current business segments, which are higher margin with lower return ratios, mobile assembly of China brands is a capex-intensive, high asset turns, high ROCE but lowmargin business. DIXON’s ROCE stands at 34% in FY26, but EBITDA margin of the mobile division at a mere 3.5%, including production-linked incentives (PLI) benefits. Adjusting for PLI, margin would be at 2.8-2.9%. Thus, this new venture would bolster top line and return ratios for AMBER; however, it would be margin-dilutive as mobile PLI has ended as on FY26.
Revenue cyclicality would be offset:
The new foray into mobiles would help further reduce cyclicality of revenue. Historically, 70-80% of AMBER’s revenue has been from the consumer durables segment, which majorly consists of RAC finished goods assembly and components supply. This is a cyclical business, which is prevalent in Q1 and Q4 during Summer, post which utilization sharply reduces. Contrary to this, mobile manufacturing is steady throughout the year, thereby improving AMBER’s sales trajectory through the year.
AMBER’s scope would remain as a contract manufacturer:
Just like DIXON, AMBER’s scope in this deal is likely to remain as a contract manufacturer, focused on assembly of the final product. China’s mobile ecosystem even in India is dominated by companies like Oppo, which provide the design to original design manufacturers (ODM), such as Longcheer, and Huaqin. These ODM then identify and setup supply chain for original equipment manufacturers (OEM) like AMBER and DIXON to procure components and assemble the final product. Thus, this business is likely to remain a low value-add business for AMBER.
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