Q2FY19 standalone result highlights
Conference call highlights: (1) Management maintained FY19E volume guidance at 2.1mn AC units sales in FY19 (+10% yoy; 0.731mn units in 1HFY19) as it is seeing strong traction in order placements, implying strong momentum in 2H19. (2) Channel inventory is being liquidated as demand momentum is picking up, especially in the West region; (3) Increase in duty for ACs from 10% to 20% will lead to higher demand for local manufacturing as witnessed from increased inquiries (4) Management is focused on product R&D, exploring new geographies and achieving benefits of operational leverage via higher volumes thus improving margins, (5) FY19E capex plan is ~Rs550mn of which YTD capex is Rs300mn, further capex will be based on new customers.
Impact on financials: FY19/FY20 EPS cut by 7%/6% to Rs26/34
Valuations & view
Amber has emerged as one of the leading design-focussed outsourced manufacturing companies with 55% market share, led by its cost-effective manufacturing, scale, backward integration, strong design capabilities and wide product portfolio. Consequently, Amber is well placed to benefit from the growing trend towards outsourcing and indigenisation of RAC production. We estimate Amber to post 18% revenue and 32% PAT CAGR over FY18-20E. Moreover, limited capex and improvement in free cash generation is likely to drive improvement in return ratios. We believe valuations at 25x FY20E earnings are attractive
Amber Enterprises India Ltd Formerly known as Amber Enterprises India Pvt Ltd. Amber Enterprises India Ltd., formerly Amber Enterprises (India) Pvt. Ltd, is an India-based original equipment manufacturer. The Company offers products, including air conditioners, microwave ovens, refrigerators, washing machines, heat exchangers, multi flow condensers, luminaries, plastic extrusion sheets, vacuum forming components, injection molding components, sheet metal stamping and auto parts. It manufactures heating, ventilation and air conditioning (HVAC) coils for air conditioners. It offers Fin & Tube Type Heat Exchanger Coils. It produces tube bending fixtures, swage up or swage down toolings, capillary forming tools, spinning machines, deburring tools and brazing fixtures. It offers luminaries that are used various places, including offices, hospitals and clinics, schools and colleges, malls and shops. The Company's sheet metal components are used in various industries, including white goods, switchgears, automobiles and lighting.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
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