Amber Enterprises soars 14% ahead of Q2 results; zooms 106% in 7 months

Shares of Amber Enterprises hit a new high of Rs 6,148.95, as they surged 14 per cent on the BSE in Monday’s intra-day trade ahead of the September quarter (Q2FY25) results on Tuesday, October 22. In comparison, the BSE Sensex was down 0.11 per cent at 81,137.25 at 01:47 pm.

The stock of household appliances has outperformed the market by surging 41 per cent in one month, as against 4.5 per cent decline in the benchmark index. In the past seven months, the stock has zoomed 106 per cent from a level of Rs 2,991.20 on March 20. 

In the last one week, the stock price of Amber Enterprises has soared 20 per cent after Amber group and Korea Circuit announced a Joint Venture (JV) to manufacture printed circuits boards (PCBs) in India.

 

The JV sets the strategic foray into high technology and advanced manufacturing of HDI, Flex and Semiconductor substrates PCBs. This collaboration embarks on the shared vision of bringing world class technology and manufacturing excellence to India and caters to the fast growing domestic electronics demand.

Amber Group, through its subsidiary IL JIN Electronics, and Korea Circuit will hold 70 per cent and 30 per cent ownership, respectively, in this JV. In line with the 'Aatmanirbhar Bharat' vision of Government of India, this JV further strengthens the domestic value addition of the industry and capabilities for import substitution, the company said in a stock exchange filing.

Amber is one of the most backward integrated and comprehensive solution providers in the segment of room air conditioners (RAC), RAC components and Non-RAC components. Over the years, this segment has distinguished itself from a luxury to necessity and its appetite for investment potential, driven by the growing demand for cooling solutions in households, construction, infrastructure, and hospitality.

For the quarter ended June (Q1FY25) Amber had posted 60 per cent year-on-year (YoY) jump in consolidated profit after tax at Rs 75 crore. Revenue grew by 41 per cent YoY at Rs 2,401 crore due to strong demand for RAC owing to favorable summer season.

Owing to favourable weather conditions and good secondary sales, Amber recorded a growth of 50 per cent YoY in the RAC whereas the non–RAC components vertical grew by 39 per cent YoY. On a blended basis, this division grew by 44 per cent YoY.

The management has a positive view on the long-term growth of the RAC segment, particularly components expected to be driven by improved AC demand in the coming years and continuous addition of new segments and clients in consumer durables. For the electronics division, the company is adding new customers in segments such as automotive, defense, medical, and telecom and is targeting to grow its electronics division at a fast pace. The company is also continuously expanding the scope of addressable market in railways, though ordering remains slow in this segment.

Amber is well-placed to capture incremental demand accruing from the indigenisation of both fully built-up units and components ecosystem development through lower imports. The company will also be a key beneficiary of the Production Linked Incentive (PLI) schemes for Air-conditioners (ACs) and components, according to analysts.

Overall, the outlook remains optimistic with the management confident of capturing opportunities with better volume offtake despite short-term challenges, such as tepid volume growth in FY2024 and margin pressure in some components, the brokerage firm Sharekhan had said in Q1FY25 result update.

Management remains optimistic about growth in components (including mobility, electronics, and non-RAC components), new customer additions as well as exports in the next 3-4 years. Further, traction in the high growth sectors such as railways could augur well. Moreover, in the long term, under penetration of RAC, rising temperatures in India, changing lifestyle patterns, and increasing contribution from Tier-II, Tier-III, IV cities would drive the RAC industry’s growth and benefit Amber indirectly, driving demand for AC components, it added. However, the stock is now trading above target price of Rs 5,500 per share.