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Valuations captures positivity; downgrade to NEUTRAL

Result Synopsis

AMBER’s Q2FY25 performance has been significantly ahead of ours and consensus estimates with revenue and EBITDA surpassing estimates by 41% and 45% respectively. Consumer durables and EMS division has registered growth of 97% and 98% respectively on yoy basis, with margin improvement of 160bps and 220bps respectively. Strong revenue growth in consumer durables was on back of channel filling, addition of new customer and introduction of new products. On the electronics side diversification into new business of defense, aerospace Auto and consumer electronics has resulted in strong growth. Considering strong growth prospects and current order-book management and despite strong performance in H1 management is maintaining its revenue growth guidance in the electronics division 45%, while it expects consumer durables to outperform RAC industry. Management is confident of strong revenue growth in medium term on huge import substitution opportunities and expectation of the new incentive scheme from the government. The company has inked JV with Korea circuits which will further enhance its capabilities and enable company to make inroads into mobile, IT, module and semiconductor industry. We have been positive on the stock and had recently upgraded the stock to BUY, post that the stock has rallied ~25%. We believe that the current positivity is captured in the stock price and hence we downgrade the stock to Neutral with revised PT of Rs6,684

We believe AMBER’s focus on enhancing its capabilities on the components side, its JV with Korea circuits will bode well for the company. Further, Asccent circuit will result in increased PCBA manufacturing for the electronics universe. We now estimate Amber’s Revenue/EBITDA/PAT to grow at 23%/28%/56% CAGR over FY24-27E.

Result Highlights

* Quarter summary – Amber delivered strong performance with Revenue/EBITDA beating estimates by 41% and 45% respectively. Revenue growth stood at 82% aided by channel filling coupled with new products and customer addition.

* Margins – Gross margins has seen contraction of 210bps yoy basis, while EBITDA margin has improved by 33bps Gross margin at 20.1% has been lower on unfavorable product mix towards finished products.

* Guidance –Management is maintaining its guiding strong 25% FY25 revenue growth for the company on consolidated basis, despite 1HFY25 delivering significantly better performance. 1HFY25 consolidated revenue grew by 55% yoy

* Return ratio – The company expected return ratios to move higher and is expecting RoCE to improve by 300bps and in longer run it expects RoCE to move towards 19%.

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