Sample  write-ups  
 Amber Enterprises India   
Vol. No. : 25    Issue No. : 42                             Friday, August 30, 2019

Capitalising on growth in air conditioning industry

Fully backward integrated, the company offers one stop shop for air conditioners and its components to all the leading brands in India

Related Tables
4Amber Enterprises India: Consolidated financials
4Amber Enterprises India: Consolidated results

Idea Amber Enterprises India
BSE Code 540902
BSE Group B
NSE Code AMBER
ISIN Demat INE371P01015
Bloomberg AMBER@IN
Reuters AMBE.BO
Par Value Rs 10
52-week High/Low Rs 1121 / Rs 621
Current Price Rs 825 on BSE and Rs 826 on NSE
(as on 30 August 2019)

Amber Enterprises India (AEIL) was incorporated in 1990 and is the leading room air conditioner (RAC) original equipment manufacturer (OEM) and original design manufacturer (ODM) in India. It supplies to almost all leading air conditioning brands in India. The company has diversified portfolio which includes Room Air conditioners (RACs), RAC Components and Air conditioning solutions for Railways, Metro’s, Defence, Bus & Commercial segment.

Strategically located multiple manufacturing facilities

Amber Group is a prominent solution provider for air conditioner OEM/ODM industry in India. It has a dominant presence in Room Air conditioners' complete unit and deals in major Room Air conditioner components with 15 manufacturing facilities across India focusing on different product segments.

Multiple manufacturing locations help in meeting the requirements of customers at different locations and enable optimal utilization of capacities, adjusting for seasonality.

One stop shop for air conditioners and its components

The Company designs and manufactures complete RACs including window air conditioners (WACs) and indoor units (IDUs) and outdoor units (ODUs) of split air conditioners (SACs) with specifications ranging from 0.75 ton to 2 ton, across all energy ratings with various types of refrigerants. It also designs and manufactures Inverter RACs ranging from 1 ton to 2 ton.

The company is a manufacturer of functional components of Room Air conditioners that include heat exchangers, motors and multi-flow condensers and inverter PCB Boards with other components such as sheet metals components, copper tubing and including plastic extrusion, vacuum forming and injection molding components.

The company along with ACs also manufactures NonAir conditioner components like washing machine tubs, Printed Circuit Boards (PCB), case liners for refrigerators, washing machines, microwave oven and extruded sheets for refrigerators and sheet metal parts for various application including automobiles. The Company leverages its ability to innovate and manufacture products providing an edge to diversify into related business verticals.

Fully backward integrated

Most of the operations are integrated backward. Processes such as product development and manufacturing solutions including designing, tooling and validating to final assembling and testing are carried out in-house. The assembly lines are flexible and can shift from assembling WACs to ODUs of SACs within no time.

With expertise in components like heat exchangers, sheet metal components, injection molding components, system tubing, motors and inverter PCB board. Amber is strongly positioned with its backward integration to derive the core deliverables in terms of quality, cost and delivery.

Acquisitions help business diversification

Its recent acquisition allows it to diversify into newer segment of HVAC such as Mobile, Transportation and Commercial Refrigeration while adding some good products to its basket. This allows the Company to leverage on its technology and expertise to maintain its strong hold in the existing as well as new market.

In May 2019 Amber Enterprises acquired 80% of the Equity Share Capital of Sidwal. Sidwal is engaged in the business of Heating, Ventilation, Air Conditioning and Refrigeration equipment for mobile applications such as railway coaches, metro coaches, buses, telecom, commercial refrigeration and related components. Sidwal has manufacturing facilities located in Faridabad, Haryana and Kala Amb, Himachal Pradesh. This acquisition will strengthen Amber's leadership and market presence in the air conditioner space in India and it will create a platform providing unmatchable, high quality and price competitive product offering for mobile applications, railways, metro, bus, telecom and defence applications.

Cool June 2019 quarter performance – sales jump 75% and PAT soar 131%

For the quarter ended June 2019, consolidated sales jumped 75% to Rs 1235.94 crore. OPM improved 140 basis points to 9.5% which saw OP rise 105% to Rs 117.49 crore.

Other income jumped 377% to Rs 5.04 crore and interest 116% to Rs 10.97 crore. As depreciation grew 37% to Rs 20.02 crore, PBT went up 137% to Rs 91.53 crore.

Tax jumped 123% to Rs 27.20 crore after which PAT up 143% to Rs 64.33 crore.

Minority interest was Rs 3.11 crore against NIL after which net profit soared 131% to Rs 61.22 crore.

In FY 2019, consolidated sales grew 30% to Rs 2751.99 crore. OPM fell 90 basis points to 7.7% which saw OP rise 16% to Rs 212.86 crore. PBT went up 52% to Rs 135.93 crore. Net profit went up 50% to Rs 93.66 crore.

Many factors led to substantial increase in volumes

RAC volumes for the quarter grew 89% from 549k units in Q1 FY19 to 1,039k units in Q1 FY20.

Addition of New Customers, Industry Growth & Increased Demand by exiting customers led to substantial increase in volumes.

Addition of new energy efficient models on a continuous basis, impact in increase of custom duty due to which the company is seeing a shift to domestic procurement in place of imports, increased demand from online players which do not have manufacturing facilities and now due to higher custom duty and logistical hassles, imports not being a viable option are all going in the favour of the company.

Not only its room AC division, but also AC components and non-AC components division are gaining momentum and penetration level with customers is increasing.

Positive management comments

Commenting on the results and performance for Q1FY20, Jasbir Singh, Chairman & CEO of Amber Enterprises India Ltd said: "We are happy to deliver a record performance for the quarter with highest ever Revenues, Ebitda driven by increased volumes for a quarter. Our performance has increased on a year on year basis as well as quarter on quarter basis too in spite of Q4 being the highest in our business.

On a consolidated basis, our revenues have increased by 75% and PAT has increased by 143% in Q1 FY20. Addition of new customer, industry growth and deepening our presence in existing customers led to a volume growth of 89%.

We have increased our RAC Components and Other Business product offerings and we foresee healthy revenues turning in to profitability going forward from our RAC components and Other Business division.

We would also like to say it is the company’s enduring commitment to outperform industry growth, through our three-pillar strategy of Product Expansion, Customer Expansion and Geography Expansion by way of R&D and Excellence in Execution.

Moving forward, we also reiterate our confidence in our ability to sustain company’s delivery of outstanding shareowner value."

Room Air conditioners and HVAC are set to see good growth

The air conditioner industry has seen a substantial change in the past couple of years. Once considered a luxury, the air conditioners are now perceived as a necessity in Indian households. Given the tropical climate, the soaring temperatures are likely to continue to drive demand for air conditioners.

Other major drivers for room air conditioner industry are a growing number of middle-class households, increasing level of disposable income and higher aspirational levels. Besides, increasing office and retail spaces in the country, along with booming tourism and hospitality sectors and higher rural electrification will further contribute to the healthy growth of the Indian air conditioner (AC) market. Also, due to invertisation, recurring electricity cost on mobility usage reduced due to high energy efficient inverters. All these factors, according to the company, are expected to drive this market to a healthy growth of 15%-18% over the next couple of years.

Surging infrastructure spending is driving the growth of Indian HVAC market. Infrastructural projects such as ongoing and upcoming airports and metro railway expansion projects across the country will further support this growth. Additionally, rapidly increasing urbanization is leading to the increase in the demand for infrastructural development. This will lead to increase in the sectors like hospitality, real estate and healthcare along with rising offices spaces and education sector, thereby driving HVAC growth in the country. Railways, Metro coaches and Bus air conditioning Mobile application of Air conditioners is also high potential growth areas.

The Company’s high value-added and technology- driven components will provide opportunities to capture shifts in customer preferences as well as evolving regulatory requirements. By providing high value added and innovative products, the Company is considered as a preferred supplier by its customers, thus taking the opportunity to consolidate its position within its space.

Valuation

In FY 2020 we expect the company to register EPS of Rs 41.7 on sales of Rs 3688.64 crore and net profit of Rs 131.16 crore. The scrip trades at Rs 825. P/E works out to around 20.

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Amber Enterprises India: Consolidated financials
 
  1703 (12) 1803 (12) 1903 (12) 2003 (12P)
Sales 1651.86 2117.58 2751.99 3688.64
OPM (%) 7.9 8.7 7.7 8.7
OP 130.86 183.87 212.86 321.06
Other inc. 8.81 8.72 9.95 15.04
PBIDT 139.67 192.59 222.81 336.10
Interest 63.86 54.17 24.57 49.95
PBDT 75.81 138.42 198.24 286.15
Dep. 40.11 49.02 62.31 84.40
PBT 35.70 89.40 135.93 201.74
EO 0.00 0.00 0.00 0.00
PBT after EO 35.70 89.40 135.93 201.74
Total Tax 13.56 27.09 41.16 62.47
PAT 22.14 62.31 94.77 139.27
MI 0.00 0.00 1.11 8.11
Net profit 22.14 62.31 93.66 131.16
EPS (Rs) * 7.0 19.8 29.8 41.7
* on current equity of Rs 31.45 crore: Face value of Rs 10 each
(P): Projections
Figures in crore,
Source Capitaline Corporate Databases

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Amber Enterprises India: Consolidated results
 
  1906 (3) 1806 (3) Var. (%) 1903 (12) 1803 (12) Var. (%)
Sales 1235.94 708.07 75 2751.99 2117.58 30
OPM (%) 9.5 8.1   7.7 8.7  
OP 117.49 57.34 105 212.86 183.87 16
Other inc. 5.04 1.06 377 9.95 8.72 14
PBIDT 122.52 58.40 110 222.81 192.59 16
Interest 10.97 5.08 116 24.57 54.17 -55
PBDT 111.55 53.32 109 198.24 138.42 43
Dep. 20.02 14.62 37 62.31 49.02 27
PBT 91.53 38.69 137 135.93 89.40 52
EO 0.00 0.00 -- 0.00 0.00 --
PBT after EO 91.53 38.69 137 135.93 89.40 52
Total Tax 27.20 12.20 123 41.16 27.09 52
PAT 64.33 26.50 143 94.77 62.31 52
MI 3.11 0.00 -100 1.11 0.00 -100
Net profit 61.22 26.50 131 93.66 62.31 50
EPS (Rs) * # #   29.8 19.8  
* on current equity of Rs 31.45 crore: Face value of Rs 10 each
(P): Projections
Figures in crore,
Source Capitaline Corporate Databases

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