Amber Enterprises India - Q1FY21 Result Update - ICICI Securities

Amber's Q1FY21 (peak season for air conditioners sales) revenue was hit by lower volume offtake by its key clients mainly due to lockdown. However, according to the management, inventory liquidation at channel level started soon after relaxation from lockdowns. Inventory at the channel level was at ~10 lakh units by the end of Q1FY21 vs. 25 lakh units in Q4FY20). We believe strong demand from tier 2, 3 cities would help it to further reduce by Q3FY21. Further, its component and mobility business (39% of topline) is also gaining traction with improved demand for room air conditioners. Under the component & mobility business, performance of 'Sidwal' remains intact with EBITDA margin of ~17% during the period. We believe Amber is likely to benefit from the government's flagship programme 'Atmanirbhar Bharat', which aims to promote domestic manufacturing of air conditioners & components over the long term. The company estimates industry's RAC and components imports would grow ~2.5-3x to Rs. 27000 crore by the end of FY25E. We believe this bodes well for Amber as it is market leader in the RAC original equipment manufacturer/original design manufacturer (OEM/ODM) industry with 55% volume market share. We revise our FY22E earnings estimates upward by 16% YoY considering faster recovery in demand for RACs post ease in lockdown restrictions.

Valuation & Outlook

We like Amber for its leadership position in the RAC OEM/ODM industry in India with a strong customer base. Focus on component business provides Amber an edge over the competition to acquire new customers and increase the wallet share of existing customers. The company is also likely to benefit from a shift in China+1 strategy by key clients post Covid-19. We revise our rating from HOLD to BUY with a target price of Rs. 1980/share (valuing 31x FY22 earnings).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_AmberEnterprises_Q1FY21.pdf

Shares of Amber Enterprises India Ltd was last trading in BSE at Rs.1705.55 as compared to the previous close of Rs. 1712.65. The total number of shares traded during the day was 1783 in over 451 trades.

The stock hit an intraday high of Rs. 1750 and intraday low of 1701. The net turnover during the day was Rs. 3060761.

Source : Equity Bulls

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