Amber Enterprises gets a 'buy'

Mumbai: Lead stock broking firm Anand Rathi recommended 'buy' on Amber Enterprises stock.

In its report, the stock broking firm stated that supported by the Centre's additional sops for the air-conditioner imports and increased demand, Amber Enterprises will set up two factories - one plant near Pune in Maharashtra and the other in South India.

After commissioning these plants, Amber's capacity to assemble IDUs and ODUs can increase by 2m (from 4.5m now) along with greater capacity for components, according to its analytical report.

After the notification, Amber added four OEM clients and is adding a few more.According to the industry estimates, 2.7m units are imported, of which 70% are filled with refrigerants.

The full benefits of an expanding client base will be visible in FY22. With its two new factories expected to be commissioned by FY22, Amber can benefit from the production-linked incentives (PLI) for components, the report added.

The analysts raised the estimates significantly and moved target to 30x FY23e EPS (from SOTP earlier), taking into account synergy/interlinks of the integrated model.

Industry growth is expected to be at 15 per cent. The room air-conditioner demand that was affected during the year due to the pandemic situation is now turning normal and re-stocking is expected to be strong in Q4, for next year's summer, the report added.

The company valuation has been raised for FY21eand FY23e to factor in greater volumes as the two factories are added. "We now model FY21-FY23 revenue/PAT CAGRs of 36 per cent/86 per cent, resulting in RoCE (after tax) rising to 13.5% (from 6.6% in FY21)." The stock value has been consolidated PE of 30x FY23 EPS of Rs100.4 (from SOTP earlier). The report recommended a Buy on the stock. However, it foresees the following risks: (a) inability to ramp up component manufacturing; (b) predatory pricing and longer credit terms being offered by global vendors. Amber Enterprises stock closed at Rs 2,405.15 on Monday.