AMBER - Amber Enterprises India Limited Share Price

Amber Enterprises India Limited reported a remarkable performance for FY '25, achieving a total income of over INR 10,000 crores with a Return on Capital Employed (ROCE) of 19.5%. The consolidated revenue rose by 48% year-on-year to INR 9,973 crores, with an operating EBITDA of INR 796 crores (up 53%) and a Profit After Tax (PAT) soaring by 80% to INR 251 crores. Management highlighted key areas of growth and strategic initiatives moving forward.

The Consumer Durable division saw revenue of INR 7,329 crores, driven primarily by the RAC sector, growing 46% year-on-year. The management expects to outpace industry growth by 10% to 12% in FY '26 due to strategic expansions and customer acquisitions.

For the Electronics division, revenue surged by 77% to INR 2,194 crores, with an anticipated margin increase to between 10% and 12% over the next two years as new, margin-accretive applications are introduced. The division achieved a ROCE of 26%, highlighting its strong capital management.

In the Railway division, revenues were muted at INR 450 crores, but management anticipates doubling revenue over the next two years driven by a robust order book and expansion into additional product categories.

Looking ahead, management plans a phased capital expenditure of INR 3,000 crores under the Electronic Component Manufacturing Scheme (ECMS) over the next five years, with an expected increase in operational capabilities and market share. They also indicated that the new joint venture with Korea Circuits will enhance their production capacity significantly.

In summary, management expresses optimism about future growth across various sectors, supported by strong revenue trajectories, strategic investments, and a focus on expanding high-margin applications.

Major Questions and Answers from the Earnings Call

1. Question: "What kind of growth are you envisaging for EMS sector for FY '26?" Answer: I am confident that our Electronics division will achieve 10% margin growth within the next two years, thanks to our focus on margin-accretive applications like industrials and automotive. We anticipate a top-line growth of 30% to 40% for this division.

2. Question: "How do you see the consumer durables business responding to weak summers?" Answer: Despite concerns, we performed well in April and May, and I believe double-digit growth remains achievable for our RAC business. Additionally, our non-AC components and CAC business are doing very well.

3. Question: "Can you discuss the inventory situation in the RAC market given the delays?" Answer: Inventory levels vary across brands. Some are oversupplied, while others face shortages. We gauge demand positively; April was strong for us, with growing optimism despite current rains impacting the southern markets.

4. Question: "Can you elaborate on your Electronics business growth in the last quarter?" Answer: We achieved stellar growth due to our expanded customer base and diversification into sectors such as automotive and defense. Our revenues surpassed guidance, and we aim for more industrial applications to sustain growth.

5. Question: "What are your expected capital expenditures for the PCB project and the Korea Circuits JV?" Answer: We'll invest INR3,000 crores over five years in the ECMS scheme, with INR500 crores planned for the ongoing capex excluding ECMS. The Korea Circuit JV will involve INR2,500 crores, spread over the same timeline.

6. Question: "Could you shed light on the expected revenue contribution from the Korea Circuits?" Answer: Post-commissioning in FY '28, we anticipate generating revenue of around INR2,500 crores from this project with EBITDA margins of 18% to 20%. Our clients include reputable companies like Micron and Samsung.

7. Question: "What is the target ROCE for the proposed ECMS investments?" Answer: Based on our plans for the INR3,000 crore investment, we expect an ROCE between 25% to 30%, considering that approximately 60-65% of the outlay will be refunded through the scheme.

8. Question: "Can you clarify about the expansion into the Railway division?" Answer: We plan to double our revenue in this division over the next two years due to the resuming projects like Vande Bharat Express and our expansion into new product categories such as couplers and brakes.

9. Question: "What's your outlook on your working capital management and days?" Answer: We believe the reduced working capital cycle of 9 days can be maintained long-term, settling between 10 to 15 days as a norm though seasonality might affect quarterly figures.

10. Question: "Are there any challenges seen with joint venture losses?" Answer: The losses are due to the ramp-up phases of new businesses. We expect them to reduce to INR20-25 crores in FY '26. Our focus on high-entry-barrier products ensures long-term viability despite initial challenges.

These questions outline the strategic outlook, address seasonal concerns in consumer durables, comment on capital investment plans, and define operational and market dynamics expected to influence future performance.