Turnaround quarter for Amber Enterprises; stock jumps 15%!

Indian benchmark indices have kicked off Wednesday’s trading session on a soft note amid subdued cues from the global markets. The Nifty and Sensex were trading lower by 0.12% and 0.13%, respectively.

Despite the softer opening, one stock which has surprised everyone by its eruptive move in the opening bell itself is Amber Enterprises India Ltd.

About the company:

Amber Enterprises India Ltd (AEIL) was incorporated in 1990 and is a market leader in Indian Room Air Conditioner (RAC) industry and Air Conditioning industry for mobility applications such as Railways, Metros, Buses etc. The Company has diversified portfolio which includes RACs, RAC Components and Air conditioning solutions for Railways, Metro’s, Defence, Bus & Commercial segment. The Company has multiple manufacturing facilities across various states in India, strategically located close to customers enabling faster turnaround.

Stock Movement:

The stock opened with a gap-up at level of Rs 2222 on NSE and this was the highest level the stock has seen in the last six months. Currently, the stock is trading with gains of 15% at Rs 2165 on NSE. Interestingly, the total traded volume in the first 15 minutes of trade has surpassed over 4 lakh shares, which is greater than its prior trading session and four times greater than its 10-days average volume.

Reason for this Eruptive move in stock price:

On Tuesday, after the market hours, the stock came out with its earnings for the quarter ended March 31, 2023. Company reported a staggering 55% YoY jump in its sales to Rs 3,003 crore for the quarter ended March 31, 2023. Operating margins also improved to 7% for the same period and net profit jumped to Rs 108 crore which is a jaw dropping growth of about 82% YoY. All the divisions contributed healthily in the top line and bottom-line, leading to an improvement in the profitability ratios. Capex: Timely investments in required capex helped in increase in profitability and improved share in RAC manufacturing and other segments

Journey Going Forward:

The company has transformed from a RAC player to a diversified B2B solution provider since the IPO launch in 2018. While room air conditioner remains its focus segment, the other four divisions (Electronics, Motors, Mobility and components) within the group, are witnessing a rampant growth ultimately strengthening the top line and bottom line. Company is focused on prudent asset allocation for better return on investment, while balancing growth and profitability and improving return ratios. ROCE has improved from 11% in FY22 to 15% in FY23 and it is further expected to improve in the range of 19% to 21% in next 2-3 years’ time.