Fundamental Analysis Of Amber Enterprises: With the rising temperature due to global warming, the requirement of having an air conditioner is increasing by the day. Some are even saying that traditionally, air conditioning was viewed as a luxury commodity but not anymore. One company that is engaged in the manufacturing of Air Conditioners is Amber Enterprise.

In this article, we are going to perform a fundamental analysis of Amber Enterprises and look at the future potential of the company.

Fundamental Analysis Of Amber Enterprises – Company Overview

Amber Enterprises, established in 1990, Amber Enterprises India Limited stands as the foremost backward integrated market leader within the Indian room air conditioner (RAC) industry. With a robust presence spanning both the components sector and the finished goods market in the HVAC industry.

Amber offers a diverse product portfolio encompassing room ACs, including indoor and outdoor units and window ACs, as well as reliable critical components and mobility applications tailored for railways, metros, buses, and defense sectors. Additionally, the company extends its expertise to commercial air conditioners (CAC), catering to higher-tonnage AC requirements.

Note: If you want to learn Candlesticks and Chart Trading from Scratch, here’s the best book available on Amazon! Get the book now!

telegram channel

Leveraging its extensive backward integration and robust R&D capabilities, Amber commands a significant share in the original design manufacturing (ODM) sector. What began as a single factory in Rajpura, Punjab, in 1994 has since grown into a network of 27 manufacturing facilities strategically positioned across 9 locations in India, each marked by high degrees of backward integration.

Noteworthy among its clientele are esteemed names such as HITACHI, Daikin, LG, Blue Star, and Godrej. Here in this Fundamental Analysis Of Amber Enterprises, we can get to know the basic idea about the company and what they work on.

Furthermore, Amber Enterprises boasts a range of subsidiaries, including Sidwal Refrigeration Industries Private Limited, PICL (India) Private Limited, IL JIN Electronics (India) Private Limited, EVER Electronics Private Limited, AmberPR Technoplast India Private Limited, and Pravartaka Tooling Services Private Limited.

Segment Analysis

Room Air Conditioner: A market leader in the HVAC space, providing integrated and comprehensive solutions.

Components (RAC & non-RAC): A market leader providing functional components for the air and non-air conditioner sectors.

Mobility Application: Wide product offering in mobility applications. Robust R&D capacities serving Indian Railways, Metro, Defense, Bus, and Telecom sectors in India.

Motors: It has a strong manufacturing prowess, offering over 200 models and serving some of the key marquee customers across domestic and export markets.

Electronics: Providing solutions in the home appliances and consumer electronics segments. Imminent manufacturers of smart wearables and hearables.

Industry Overview

India’s economy has been on a remarkable growth trajectory in recent years, with its GDP surging from USD 1 trillion to 3.1 trillion in just over a decade. According to the economic survey, real GDP growth willreach 6.5% in FY24. Though lower than in FY23, India will still be one of the fastest-growing economies in the world.

The electronics industry is projected to be a key driver of economic development, presenting lucrative opportunities for Amber. The Indian air conditioner market holds significant growth potential. The market value for FY 2022–23 stood at US$3.2 billion and is expected to reach US$10 billion by 2028.

As per several reports, the HVAC industry is expected to register a 10–12% CAGR from FY 2022–23 to FY 2027–28. Household penetration of Room Air Conditioners (RACs) in India remains low at 12–14%, compared to much higher levels in other countries. which highlights the vast untapped market potential for RACs in India, signaling promising prospects for Amber’s future growth and expansion.

The total addressable EMS market in India was valued at Rs 3,372 billion in FY22 and is expected to grow to Rs 7,504 billion in FY26 with a CAGR of 22%. However, the contribution of Indian EMS companies is around 44%, which is valued at Rs 1,469 bn in FY22, which is expected to grow at a 32% CAGR to reach Rs 4,502 bn by FY26.

The total addressable EMS market in India was valued at Rs 3,372 billion in FY22 and is expected to grow to Rs 7,504 billion in FY26 with a CAGR of 22%. However, the contribution of Indian EMS companies is around 44%, which is valued at Rs 1,469 bn in FY22, which is expected to grow at a 32% CAGR to reach Rs 4,502 bn by FY26.

A Fundamental Analysis Of Amber Enterprises will help us find their sector and the industrial view that is required to understand the company in depth.

Fundamental Analysis Of Amber Enterprises – Financials

Revenue & Net Profit

Amber Enterprises reported revenue of Rs. 6927 crore in FY23 against Rs. 4206 crore in FY22, indicating an increase of ~65%. Its profitability has increased to Rs. 164 crore in FY23 from Rs. 111 crore, indicating an increase of ~48%. Revenue and profits increased significantly due to timely investments in required capex, which helped increase profitability and improve share in RAC manufacturing and other segments.

The figures below show the revenue & profits of Amber Enterprises over the last five fiscal years.

Fiscal YearRevenue from operations (In Crores)Net Profit (In Crores)
20236927164
20224206111
2021303183
20203963164
2019275295
4-year CAGR25.96%14.63%

Profit Margins

The financials reported an operating margin of 4.78% and a net profit margin of 2.36% in FY23, compared to 4.77% and 2.64%, respectively, in FY22. From a five-year perspective, operating margins stand at 5.31% and net profit margins at 3.06%.

The operating margins have been more or less stable in the past few years. Net profit margin decreased, but from a longer perspective, it has been in a similar range. 

The figures below show the profit margins of Amber Enterprises over the last five fiscals.

Fiscal YearOperating Profit Margin (%)Net Profit Margin (%)
20234.782.36
20224.772.64
20215.312.74
20205.874.14
20195.833.44
5-year average5.313.06

Return Ratios

Return on Capital Employed increased by 4% from 11% in FY22 to 15% in FY23, but considering the 5-year trend, the RoCE has been in a similar range. On a 5-year average basis, ROCE stands at 13.7%.

Return on Equity reported a 2.2% rise from 6.6% in FY22 to 8.8% in FY23. Considering a longer perspective, RoE has decreased by 1.2%. On 5 year average basis, RoE stands at 9.28%. 

The figures below show the return on equity & return on capital employed by Amber Enterprises over the last five fiscals.

Fiscal YearReturn on Capital Employed (%)Return on Equity (%)
2023158.8
2022116.6
20219.35.9
202018.515.1
201914.710
5-year average13.79.28

Leverage Ratios

Looking at Amber Enterprises’ leverage status, we can see that, however, the D/E is increasing, but it has maintained comparatively low debt levels below two times. This indicates that the company is less financially burdened because it relies less on borrowed capital to fund its operations and expansion.

This also means that the Amber Enterprise can retain more revenue because it has a small commitment to repay debt and interest. In terms of interest, the company’s interest coverage ratio in FY23 was reported at 4.21. This means the company has generated enough gross profits to cover its interest expenses four times over.

The figures below show the debt-equity and ICR of Amber Enterprises over the last five fiscals.

Fiscal YearDebt / Equity (Times)Interest Coverage Ratio (Times)
20230.74.21
20220.596.65
20210.223.93
20200.285.55
20190.236.53
5-year average0.45.37

Fundamental Analysis Of Amber Enterprises – Key Metrics

ParticularsAmountParticularsAmount
CMP4127Market Cap(Cr)13906
EPS46.5Stock P/E87.9
RoE8.8RoCE15
Promoter Holdings40.13%FII Holdings28.29%
Debt to Equity0.7P/B7.09
Operating Profit Margin4.78%Net Profit Margin2.36%

Fundamental Analysis Of Amber Enterprises – Future plans

  • The company expects to improve its ROCE significantly from the current levels and is expected to be 19%–21% in the next 2–3 years.
  • Its primary objective is to be the number one OEM/ODM parts manufacturing company and the customer’s first choice.
  • Amber aims to strengthen its position not just in the Indian RAC market but also in the B2B space as a component manufacturer.
  • AEIL also aims to ensure that every unit within its group is significantly powered by renewable sources soon.

Conclusion

As we conclude the article on the fundamental analysis of Amber Enterprises, we have understood their business, financials, and future outlook. Further analysis is required to understand the risk & return characteristics and suitability before investing. Do comment on your thoughts in the section below.

Written by Ashish Agarwal

By utilising the stock screenerstock heatmapportfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.


Start Your Stock Market Journey Today!

Want to learn Stock Market trading and Investing? Make sure to check out exclusive Stock Market courses by FinGrad, the learning initiative by Trade Brains. You can enroll in FREE courses and webinars available on FinGrad today and get ahead in your trading career. Join now!!