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Target: ₹2,929
CMP: ₹2,233.55
Our interaction with management of the company suggest Amber is gradually transforming into an air-conditioning solutions provider, thereby improving its wallet share from brands that have or are in process of setting up captive manufacturing capabilities.
Amber is expected to outperform the industry as: Completed reliability testing for critical electronic/mechanical components for RAC and is also winning orders; acquired capabilities and approvals for Railways, which is aggressively increasing AC coaches; expects small exports order in the current fiscal, being on the verge of completion of 3-year testing period; Launching new product categories of wearables, hearables, and telecom products; and Major capex cycle is over, which will boost utilization levels and improve return ratios.
Given its leadership position in outsourced RAC market, as also the potential to outperform RAC industry in medium term, we are upbeat about the stock. Amber’s return ratio has been below par, saddled with lower asset turns and higher capex intensity. Now with assets turn set to get better with export opportunities, coupled with lower capex intensity, will improve return ratios.
We continue with our Buy rating at a TP of ₹2,929 valuing the company at 30x FY25 EPS
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