AMBER - Amber Enterprises India Limited Share Price

Management provided a positive outlook for Amber Enterprises India Limited, expecting strong growth across all divisions despite challenges in the room air conditioning (RAC) industry. Key highlights from the management include:

1. Consolidated Performance: Revenue increased by 44% to INR 3,449 crores, with operating EBITDA growing by 31% to INR 263 crores and PAT rising by 42% to INR 106 crores. The EBITDA margin is anticipated to reach between 8% to 9% by FY '26 end.

2. Consumer Durables Division: The division experienced a revenue increase of 33% to INR 2,560 crores, with expectations to outperform the RAC industry by 10% to 12%. The outlook remains optimistic despite reported inventory issues in the sector, with management expecting 15% growth even in a potentially challenging market.

3. Electronics Division: Revenue nearly doubled to INR 766 crores (97% growth). The company aims to grow this division to $1 billion over the next three years, targeting an EBITDA margin of 11.5% to 12%. Recent acquisitions will contribute significantly to this trajectory.

4. Railway Division: Revenue grew by 29% to INR 123 crores, with plans to double revenue over the next two years due to strong demand from metro projects and product portfolio expansion.

5. Capex and Acquisitions: Capital expenditures are projected at INR 5 billion to INR 7 billion annually over the next two years. Significant investments include INR 650 crores for the Hosur project and INR 1,200 crores for the Korea Circuit JV.

6. Partnerships: A strategic cooperation agreement with GMCC ensures compressor supplies for three years. Moreover, new acquisitions in the electronics space are expected to strengthen the company's market position further.

Management remains confident about long-term growth prospects, citing increasing demand for their products across various sectors.

Here are the major questions asked during the Q&A section of the earnings call, along with the respective detailed answers:

1. Question: "On your opening remarks, you mentioned that you're looking at Electronics business touching $1 billion revenue in the next 3 to 4 years. How much of it will be driven by acquisitions? How much by the bare PCB and PCBAs?"

   Answer: "The Electronics division has a substantial total addressable market of around $22 billion to $25 billion. We expect to generate about INR2,200 to INR2,500 crores largely from PCB applications and industrial portfolios, while around INR1,300 to INR1,400 crores will come from other segments by then. This growth is primarily driven by the expansion of various product lines and acquisitions."

2. Question: "Some brands are talking about inventory buildup in the channel; do you see a slowdown in your consumer durables segment?"

   Answer: "Inventory is currently around 2.5 million to 3 million units, significantly higher than the standard 1.4 million to 1.5 million. As the lean season typically occurs in Q2 and Q3, our growth may soften. However, we expect a 15% growth if the industry trends are flat or negative, and if positive by 10%, we will be in line with expectations despite challenges."

3. Question: "Can you quantify the contribution from the commercial AC front?"

   Answer: "The commercial AC segment has grown over 40% for us, benefiting from the addition of multiple product lines, including ductable units and packaged parts. However, we prefer to withhold specific revenue figures as they fluctuate."

4. Question: "What are your expectations on the EMS growth for the current fiscal year? Should we maintain the Q1 run rate?"

   Answer: "We don't anticipate maintaining the 100% growth in Q2 due to seasonal lean periods in consumer durables. However, for the full year, with ramp-ups in automotive and telecom sectors, we expect strong growth by year-end."

5. Question: "What is the rationale behind the increase in unallocable expenditures?"

   Answer: "The increase in other unallocable expenses has been noted, and I will need to check specific details on this for further clarifications."

6. Question: "Could you clarify the capex requirements for the applications under the ECMS schemes for the next several years?"

   Answer: "We'll invest prior to obtaining incentives, with the first phase of our JV with Korea Circuits requiring INR1,200 crores in the first year. We expect government approval for these applications by late 2025, with substantial capex expected throughout the next 5-6 years, alongside subsidies that can cover up to 70% of net invested capital over the scheme period."

7. Question: "What is the peak debt Amber plans over the next year and your overall funding strategy?"

   Answer: "Our strategic goal is to be net debt-free by the end of the next financial year, maintaining a policy to not exceed 2x debt-EBITDA. We will raise funds as necessary and are exploring various options including public offerings and private equity investments."

8. Question: "Could you discuss the margin guidance for the new acquisitions like Power-One and Unitronics?"

   Answer: "We expect to see margins of around 17% to 18% in Power-One due to changes in salary structures and eliminating GST impacts from revenue calculations. For Unitronics, we anticipate a more gradual ramp-up in profitability as we integrate and grow their unique offerings in the Indian market."

These questions and their answers encapsulate key financial metrics and operational insights presented during the earnings call.