ValuePickr Forum

Amber Enterprises - AC Contract Manufacturer

Hi All,

Starting thread on Amber Enterprise.

Amber basically manufactures RACs and components for eight out of the top 10 RAC brands in India.

IPO came @859 in Jan 2018 at PE = ~70
Current Price: 830, Current PE = 27 , as earning grew.
Market Cap: 2,554cr, sales: 2,718

WHO WE ARE

A ONE-STOP SHOP FOR AIR CONDITIONERS AND ITS COMPONENTS FOR CONSUMERS.

Amber Enterprises India Ltd is a prominent solution provider for Air conditioner OEM/ODM Industry in India. It has a dominant presence in RACs complete unit and deals in major RAC components with 10 manufacturing facilities across India focusing in on different product segments.

With expertise in components like heat exchangers, sheet metal components, injection molding components, and system tubing and motors, Amber is strongly positioned with its backward integration to derive the core deliverable’s in terms of quality, cost & delivery.

We offer higher energy efficiency and expertise in indoor, outdoor, split and window AC units. We deal in AC components as well as non-AC components.

We have a Diversified Product portfolio which includes:

  • 1
RACs

WE DESIGN AND MANUFACTURE COMPLETE RACS INCLUDING WINDOW AIR CONDITIONERS(“WACS”) AND INDOOR UNITS (“IDUS”) AND OUTDOOR UNITS (“ODUS”) OF SPLIT AIR CONDITIONERS ("SAC"S) WITH SPECIFICATIONS RANGING FROM 0.75 TON TO 2 TONS, ACROSS ENERGY RATINGS AND TYPES OF REFRIGERANT.WE DESIGN AND MANUFACTURE INVERTER RACS TOO.

  • 2
RAC Components:

WE MANUFACTURE RELIABLE FUNCTIONAL COMPONENTS OF RACS THAT INCLUDES HEAT EXCHANGERS, MOTORS AND MULTI-FLOW CONDENSERS WITH OTHER COMPONENTS SUCH AS SHEET METAL COMPONENTS, COPPER TUBING AND INCLUDING PLASTIC EXTRUSION, VACUUM FORMING AND INJECTION MOLDING PROCESSES TOO.

  • 3
Non AC Components:

WE MANUFACTURE COMPONENTS OTHER DURABLES AND AUTOMOBILES SUCH AS CASE LINERS FOR REFRIGERATOR, PLASTIC EXTRUSION SHEETS, SHEET METAL COMPONENTS FOR MICROWAVE, WASHING MACHINE TUB ASSEMBLIES WITH OTHER SHEET METAL AND PLASTIC INJECTION MOLDING AND EXTRUSION COMPONENTS FOR AUTOMOBILES AND METAL CEILING INDUSTRIES.

History:


Capex plans

In tandem with the growth in its order book, capex of Rs 75-80 crore was incurred in FY19 on R&D and an additional manufacturing line. Amber plans to set up a new manufacturing facility in south India. For this, the company will invest in land and building (worth Rs 30-40 crore) in FY20 and Rs 55-60 crore on a new assembly line in FY21.

Valuation:

Currently stock is valued at PEG Ratio: 0.79, Market Cap to Sales: 0.94, which looks reasonable for decently growing business.

Investment Rational:

  • Long Runway: The penetration of room ACs in Indian households is just 4%, hence long runway ahead, and AC is not luxury item anymore, at-least in north India its becoming necessity, and i don’t see any reason why the whole AC market wont grow in next 10 years, there might be temporary slowdowns, but not permanent one.

  • Decently growing company: In last 6 years sales has grown 3x where as profit has grown 4-5x.

  • Consolidating market: Most of the AC brands are their customers, and some competition is going away as LEEL almost collapsed due to fraud, so Amber is able to consolidate market, they also acquired Sidwal (Market leader in Railway & Metro AC), IL Jin and Ever electronics(AC Parts maker) recently.

  • Focused approach: till date all the acquisition and expansion Amber did are majorly focused on AC market, which i think is good as manufacturing is game of scale & efficiency.

  • To promote ‘Make in India’ initiatives, the government has imposed steep custom duties on imported RACs and its components. This should help Amber bag new contracts.

  • Recently they added both Amazon India & Flipkart as there customers and decent growth from digital market.

Risks/Concerns:

  • Technological disruption in AC tech: although i think it’s low probability, still it can happen.

  • Customer Concentration: 75% of sales is from top 5 customer only, which is quite concentrated.

  • Stiff competition in the consumer durables business, RAC brands are forced to take price cuts in a bid to gain market share, This could put Amber’s margin under pressure since its contracts are B2B (business-to-business) in nature.

  • Demand slowdown: as in current scenario demand of even food products is effected, and of-course consumer discretionary items can experience bigger slowdown like auto’s.

  • Company looks aggressive in acquisitions as in last 2-3 years they acquired 3 companies, acquisitions are usually considered risky way for expanding business, one wrong acquisition can plague the company.

References:



Disc: Still Evaluating and its work in progress and have a initial position @ 825.

Appreciate members feedback, point of view on Amber business and Quality of Management as someone said, in India, Management is multiplicative factor if management is zero everything goes to Zero.

6 Likes

All three directors are seems to be dressing on the salad … But how they add value to the company don’t know . all three became director on same day (this is HAJMOLA TIME to take pill to digest this ) MAY be this made during IPO …
Dr. Girish Kumar Ahuja became Director of your Company on 20 September 2017. He is a qualified and practicing Chartered Accountant for the past 49 years consultancy experience

Ms. Sudha Pillai became Director of your Company on 20 September 2017. Ms. Pillai joined the Indian Administrative Service in 1972 at the age of 22 with Second Rank on all India basis

Mr. Satwinder Singh became a Director of the Company on 20 September 2017. Mr. Satwinder Singh heads Vaish Associates Advocates (“Firm”) corporate practice at New Delhi and has over 25 years of experience

High raw material cost average 82% production cost 4% employee cost 3% SO TAKE TIME TO ANALYSE HOW THEY WILL GROW , but they certainly can COOKED THE BOOKS I MAY BE 100% WRONG
now Sales Growth % 2015 2016 2017 2018 2019 26.39->-11.48%->51.68%->28.19%->28.33% One need to find the ALLADIN GIN they found in IN 2017( DIG for the source of growth and check is this sustainable or not

you need to check at what valuation they acquire Ever Electronics private limited .

there are various opportunities of steady compounders are available in this short meltdown of market . PROTECTION of CPTIAL must be the AIM than to heading for GROWTH or MULTIBAGGERS
regards
there are lots of related party transaction you must be well aware of these

disc: I am not SEBi approved Analyst This is not an recommendation to buy sell or hold

3 Likes

Sidwal is the best thing happened to them…may support lean q3 and q4. Dixon has diverse business compare too much depend upon AC.
Climate change,rising temp. is blessing in disguise for the co.

1 Like

Can you please elaborate on this point?

@nityanandparab ji Sorry to respond you late this is the snip from screener


HOW THEY WILL GROW: they can take either organic or inorganic path for growth .But in march 2018 they shows income from shares as 474.68 Crs

COOKED THE BOOKS ( My intent is not that they had cooked the books but there MIGHT be chances i haven’t gone to deep as i was not interested in the company so didn’t dive deep that’s the reason i wrote i might be 100% wrong )
There are many ways that a company can inflate the earning specially during the BULL run .It gave them good chance to raise more money


regards

updates on the company

1 Like

I recently presented Amber enterprises as a stock idea in Bangalore Investors group.Sharing the Presentation.
Disclaimer: have a tracking position; please do your due diligence.Info gathered from multiple sources.Amber enterprises.pdf (1.5 MB)

1 Like

Mar 2018 they did the IPO wherein they raised 475 cr in fresh issue.

I was going thru the RHP and came across the following Related Parties where the promoters have/had shareholding/directorship
image
Q1. Though of the above in most of the entities the existing promoters have given up their directorship, is there a chance of any indirect control, etc? Does any 1 have any idea?
Q2. If one looks at Amber Infracon Systems Pvt. Ltd. - This company is involved in HVAC business in the commercial space. It is headed by Mr. Prabhakaran Singh who was also nominated as the Independent Director in Ever Electronics Pvt. Ltd. (Amber’s Subsi). Moreover, if one looks at the company’s website (http://amberinfra.com/), the registered address of the company and Amber Enterprises is same. The current Promoters were directors in this company at some point in the past.
Are there any conflicting situations occuring? Any competitive businesses being run in Private?

As being very new in the exchange there are lot of things which are not clear yet, also so many big broking agency and big agents are attending concall and asking questions, but yet there are no research report on this company. may they are getting their business model, working culture. May be they are waiting 2-3 years to be the picture clear.