Amber rallies 6% on inking JV pact with Resojet to make washing machines

The JV is being set up to manufacture fully automatic top and front load washing machines; Amber will invest Rs 35 crore in Resojet to acquire 50% in the JV

Shares of Amber Enterprises rallied 6 per cent on BSE to Rs 3,605 in Friday’s otherwise range-bound market after it entered into a 50 per cent joint venture (JV) with a Radiant Group company Resojet,

The JV is being set up to manufacture fully automatic top and front load washing machines; strengthening Amber's consumer-durable vertical. Amber will invest Rs 35 crore in Resojet to acquire 50 per cent stake in the JV company. 

The stock of the household appliances company was trading higher for the third straight day, surging 14 per cent during the period. In comparison, the S&P BSE Sensex was up 0.17 per cent at 72,766 at 11:19 am.

Amber said the JV will propel its diversification beyond air conditioners into the washing machine and its component segment, thereby solidifying its position within the consumer durables market.

The JV will also facilitate both the companies to cater to the evolving customer needs, deliver high quality products, and develop the local manufacturing ecosystem in India, it added.

Meanwhile, the stock price of Amber hit a record high of Rs 4,615.20 on January 31, and had underperformed the market by falling 32 per cent till Tuesday, March 19.

However, in the past one year, it has zoomed 86 per cent, as compared to a 25 per cent rally in the S&P BSE Sensex.

The Amber group is principally engaged in manufacturing products like air conditioners, electronics and refrigeration solutions to railways, microwave ovens, washing machines, refrigerators, heat exchangers, sheet metal components, HVAC (Heating, Ventilation and Air Conditioning) products and services for mobility applications etc.

Amber sees the growth in electronics to be fuelled by the middle class aspiring for a higher standard of living. Rising disposable income, rapid urbanization and education are likely to drive this aspiration higher.

Coupled with technologies such as big data analytics, artificial intelligence, robotics, and smart automation that will deeply embed electronics in everyday life, the electronics industry is estimated to be a strong pillar of economic growth and Amber is well positioned to capture and capitalise on these opportunities, it said in its FY23 annual report.

Meanwhile, Amber has incrementally de-risked its business from room air conditioner (RAC) towards components over the past few years. RAC share in the company's sales mix has declined from 71 per cent in FY18 to 38 per cent in Q3FY24.

Brokerage Jefferies remains bullish on Amber's diversification into components, and estimates FY24-30 sales/PAT CAGR at 15 per cent/36 per cent, led by diversification in components, new capex commissioning, client adds and PLI upside.

Over FY24-30, the brokerage estimated components CAGR at 18 per cent to outpace that in the RAC segment at 9 per cent. This can potentially expand core EBITDA margin from 6.9 per cent in FY24 to 7.7 per cent by FY30 as select of these components are fast-growing and margin-accretive, Jefferies said.