Buy Amber Enterprises; target of Rs 3250: Sharekhan

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Sharekhan's research report on Amber Enterprises

Q2 performance was subdued with a loss of Rs. 4 crore (vs. estimate of profit of Rs. 8 crore) as the miss in operating margin, rise in depreciation cost (up 42% y-o-y), and higher interest expense margin (up 50% y-o-y) offset the slight beat in revenue. Q2 saw large liquidation of the AC product inventory; however, management expects the industry to return to normal inventory level by the end of Q3FY2024. Long-term growth is still intact as management expects to double its revenue in both electronic and railway division’s subsystem segments over the next two years and is focused on margin improvement with the launch of high-margin new products.

Outlook

We maintain our Buy rating with a revised PT of Rs. 3,250 (based on FY2026E EPS), as we expect profitability to improve, backed by a better product profile in the RAC division, traction in motors, electronics and mobility division as well as growth in exports. At the CMP, the company is trading at the valuation of 32x/23x its FY202E/FY2026E EPS.

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Amber Enterprises - 25 - 10-2023 - khan