Amber Enterprises India Ltd. share price target

Takeaways from Q2FY24: (1) New businesses of Electronics, Railway sub-systems and Mobility are gaining traction (likely to post revenue growth of 25+% YoY in FY24). The focus on hearables ad wearables and joint venture with Nexxbase augurs well for strong growth in PCBA business. (2) Strategy to focus more on components instead of selling RAC is likely to result in higher growth in FY24-26. (3) EBITDA margin is likely to expand due to lower input prices and operating leverage.

We maintain our BUY recommendation on the stock.

Unseasonal rains in North India in Apr’23 have impacted the revenue growth rates. However, we note Amber has gained market shares and reported revenue decline of just 6.8% vs industry revenue decline of 20-25% YoY. The strategy to focus on components business is working well.

Q1 revenue weak given the worst of bad seasons, though margins improved on a better product mix

While we remain enthused by market share gains by Amber even in FY23, we note the company has reported (1) negative FCF in FY23, sixth straight year of negative FCF and (2) FY23 RoCE is below cost of capital.

Q4 a beat as all segments posted strong growth, led by electronics (+69% YoY) and RAC & components (+55%)