PL Capital initiates coverage on Amber Enterprises, sees up to 35%; here's why

PL Capital recently initiated coverage on Amber Enterprises, highlighting the company's strategic initiatives to enhance its Electronics and Mobility segments. Amber is poised to become a full-stack electronics manufacturing services (EMS) provider with a robust Rs50 billion order book, indicating potential long-term growth. The management expects a margin improvement in its Electronics segment from around 7% in FY25 to between 10% and 12% over the next two to three years.

The report forecasts that Amber's Electronics segment could witness a 41.2% revenue CAGR over FY25–27E, alongside a 125 basis points expansion in EBITDA margin. This growth is supported by a planned capital expenditure (CAPEX) of Rs6.5 billion in Ascent Circuits and an additional Rs30 billion investment over the next five years in the Electronics segment. This strategy is expected to result in a robust 53.3% EBITDA CAGR, underscoring Amber's potential for significant margin expansion.

Amber is also intensifying its focus on the Mobility segment, driven by a strong Rs20 billion order book. The company aims to capture 28–30% of the Bill of Materials (BoM) per railway coach and achieve an 18% EBITDA margin. Amber plans greenfield expansions and joint ventures with Yujin and Titagarh, integrating deeper into high-value rail subsystems and defence exports, said PL Capital.

Amber is strategically diversifying its Consumer Durables segment beyond room air conditioners (RACs) through both organic initiatives and acquisitions. This includes entering a 50:50 joint venture with Resojet to develop fully automatic washing machines, enhancing capacity utilisation and broadening product offerings said the brokerage.

The Consumer Durables segment is expected to deliver a 17.1% revenue CAGR over FY25–27E, with an EBITDA margin expansion of approximately 80 basis points. Amber is also leveraging government incentives through a Rs21 billion CAPEX to expand its facilities, aiming for a 30-32% revenue contribution from non-RAC components by FY27E, it said.

The company's overall growth strategy is supported by improved capacity utilization and a strong order book, positioning Amber for healthy long-term growth. PL Capital estimates a revenue, EBITDA, and PAT CAGR of 22.8%, 27.9%, and 49.6%, respectively, over FY25–27E. The EBITDA margin is projected to expand by approximately 65 basis points, reaching 8.3% by FY27E.

Despite significant CAPEX plans, Amber's robust financials are expected to maintain its Return on Capital Employed (RoCE) and Return on Equity (RoE) at healthy levels, estimated at 18.3% and 19.3% by FY27E. This financial stability reinforces PL Capital's positive outlook on Amber Enterprises.

PL Capital has initiated a 'BUY' rating on Amber, with a sum-of-the-parts (SOTP)-based target price of Rs 9,782. This valuation considers the Consumer Durables segment at 25x EV/EBITDA by September 2027E, reflecting confidence in Amber's market position and growth prospects.