Amber Enterprises zooms 19%, stock hits new peak on strong growth outlook

Shares of Amber Enterprises hit a record high of Rs 5,177.95, skyrocketing 19 per cent on the BSE in Monday’s intra-day trade on expectation of strong earnings growth. The company\, engaged in household appliances business is also likely to witness healthy revenue growth going ahead, driven by strong traction in the electronics manufacturing service (EMS) industry.

At 02:40 pm; Amber was trading 15 per cent higher at Rs 4,991 a piece, as compared to 0.42 per cent rise in the BSE Sensex. The stock surpassed its previous high of Rs 4,880 that it touched on July 9, 2024.

India's EMS industry is witnessing a strong revenue growth trajectory, primarily driven by healthy industry demand, the addition of new segments and onboarding of new customers, increasing domestic manufacturing, import substitution, and global partnerships.

 

Analysts believe that a substantial part of the challenges is behind the EMS companies, and majority of the players are expected to either recover or at least maintain their current margin profile. Accordingly, they expect earnings growth momentum in the EMS industry to accelerate, led by a strong execution of the growing order book from existing and new end-user industries, coupled with margin recover.

Amber witnessed a margin recovery of 130 and 40 basis points year on year (Y-o-Y) in FY24 and Q1FY25 to 7.3 per cent and 8.2 per cent, resepectively, led by operating leverage. The annual earnings before interest, tax, depreciation and amortisation (EBITDA) margin is likely to expand 8.2 per cent by FY26 on account of improved revenue mix in favor of higher margin segments, Motilal Oswal Financial Services said in EMS sector update. The stock however is trading above the brokerage firm’s target price of Rs 5,000 per share.

Amber transitioned from its core focus of room air conditioners (RAC) and has structured its diversification in 3 business segments, namely consumer durable division, electronics EMS division, and railway sub-system and defense division.

The recent announcement of government imposing antidumping duty on Printed Circuits Boards (PCBs) up to 6 layers has given the much needed boost to local PCB industry. This move has enabled Amber to onboard four new customers, which is a mix of multinational companies and domestic companies comprising of segments such as consumer electronics, IT, auto, EV and defense.

With Ascent and Korea Circuits in Amber’s fold, the company has said it will be able to offer various grades of PCBs namely single layer, double layer, multi-layer, flex PCBs, HDI and semiconductor substrates thereby expanding its solutions in the segment of consumer electronics, medical devices, defence, aerospace, automobile (EV & ICE), mobile, smart energy, IT and telecom and many others.

The electronics hardware industry is progressing at a compound annual growth rate (CAGR) of 15 per cent and is the world’s largest and fastest growing industry which is increasingly finding its application in all sectors of the economy. Therefore, the localisation of electronic components becomes a determining factor for India to become a global hub for electronics, Amber said in its FY24 annual report.

According to brokerage firm Sharekhan, Amber is well placed to capture incremental demand accruing from components ecosystem development. 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 its components, the brokerage firm said.