Amber Enterprises, a leading player in India’s Original Design Manufacturing (ODM) and Original Equipment Manufacturing (OEM) markets, is capitalizing on strong growth within the air conditioning (AC) and electronics sectors. The company has strategically positioned itself to leverage multiple growth drivers, including the expansion of its electronics division and mobility segment. With a focus on improving margins and asset efficiency, Amber aims to achieve a Return on Capital Employed (RoCE) of 19% in the long run. Sharekhan maintains a BUY rating on Amber with a revised price target of ₹5500, implying a potential upside from the current market price.

Key Financial Metrics

Current Price: ₹4,669
Price Target: ₹5,500
Market Cap: ₹15,732 crore
52-week High/Low: ₹5,364 / ₹2,712
EPS FY27E: ₹144
P/E Ratio: 67.3x FY25E, 42.5x FY26E, 33.4x FY27E
RoCE FY27E: 18.8%

Growth Drivers and Strategic Focus

AC Industry Growth:
Amber Enterprises is set to benefit from the projected 13% CAGR growth in the Indian air conditioner market, with volume expected to rise from 6 million units in FY24 to 11 million units by FY28. Amber holds a commanding 27% market share in the total addressable market (TAM) for AC components, and its diversified focus on component supply should sustain growth.

Electronics Vertical Expansion:
Amber's foray into the electronics vertical, bolstered by government-imposed anti-dumping duties on PCBs, is expected to drive a 45% CAGR in this segment over the next few years. The acquisition of Ascent Circuits positions Amber as a key player in the PCB market, with growing demand across aerospace, defense, telecom, and industrial sectors.

Mobility Segment Potential:
Amber's acquisition of Sidwal has positioned the company to tap into the burgeoning demand from Indian Railways. The mobility segment holds an order book of ₹2000 crore, with revenues expected to double over the next three years, primarily driven by government initiatives like Vande Bharat.

Financial Performance and Valuation

Revenue Growth:
Amber's revenue is forecasted to grow at a CAGR of 21% between FY24 and FY27, reaching ₹12,010 crore by FY27. The company's transition from ACs to electronics and mobility segments has bolstered its margins, with EBITDA margins expected to rise from 6.0% in FY23 to 8.0% in FY27.

Profitability Outlook:
Amber’s net profit is projected to grow at a robust CAGR of 52% over FY24-FY27, driven by higher contributions from its electronics and mobility segments. The company has guided for a RoCE improvement to 19% in the long term, indicating efficient capital deployment and better asset utilization.

Valuation and Target Price

Sharekhan retains its BUY rating on Amber Enterprises with a revised price target of ₹5,500, based on 38x FY27E EPS. The valuation reflects Amber's strong growth prospects across its diversified portfolio of air conditioning, electronics, and mobility segments. At the current market price, the stock trades at a reasonable valuation considering its growth trajectory and industry tailwinds.

Investment Outlook

For Short-Term Investors:
Amber’s stock has delivered a 57.4% return over the past year, and with the stock currently trading near its 52-week high, short-term investors may consider taking profits at levels close to ₹5,364.

For Long-Term Investors:
Long-term investors should remain invested, as Amber is poised to benefit from structural industry trends such as under-penetration of ACs in India, rising temperatures, and growing demand from Tier-II, Tier-III cities. The expansion into electronics and mobility further enhances the company’s long-term growth potential.

Key Risks

Currency and Export Risks:
A higher proportion of exports in the company’s revenue mix exposes Amber to currency fluctuations, which could impact profitability.

Seasonality in the AC Industry:
The RAC industry is inherently seasonal, and lower-than-expected demand due to unfavorable weather conditions could affect Amber’s performance.