Broker’s call: Amber Ent (Buy)

Target: INR 2929

CMP: INR 2233.55

Our interaction with the company’s management indicates that Amber is gradually becoming a provider of air conditioning solutions, thereby improving portfolio share from brands that have or are in the process of establishing captive manufacturing capabilities.

Amber is expected to outperform the industry as follows: Completed reliability testing of RAC’s critical electronic/mechanical components and won orders; gained capabilities and endorsements for railroads, which greatly increase AC coaches; You expect a small export order in the current fiscal year, as you are about to finish a 3-year probationary period; launching new product categories of wearables, audio and communication products; The main capital expenditure cycle has ended, which will boost utilization levels and improve return ratios.

Given its leadership position in the outsourced RAC market, as well as the ability to outperform the RAC industry in the medium term, we are bullish on the inventory. Amber’s return ratio was below average, burdened by lower asset turnover and higher capex intensity. Now with assets set to improve with export opportunities, coupled with lower capex intensity, this will improve return ratios.

We continue with our Buy at TP of $2,929 valuation of the company at 30 times in FY ’25 EPS.