Multibagger stock: Analysts feel there's still some steam left in this company

Amber Enterprises, a dominant player in the underpenetrated AC industry and has been buzzing on Dalal Street due to its superlative performance during the past three years. Shares of the company have advanced 214%, or over 3 times, to Rs 2,890 on August 9 from Rs 918 on August 10, 2018. On the other hand, the benchmark BSE Sensex has gained 44% during the same period. Market watchers are positive on Amber as they believe that triggers like RAC components, PLI scheme and commencement of two new Greenfield facilities will provide long-term catalysts for growth.

Latest update

The company reported a consolidated net profit of Rs 11.95 crore for the quarter ended June 30. It had posted a loss of Rs 23.91 crore in the same quarter last year. On the other hand, total income from operation increased by 172% YoY to Rs 715 crore in Q1FY22.

Net profit and total income from operations of the company witnessed a fall of 84% and 55%, respectively, on a QoQ basis. Commenting on Q1 results, SMIFs Ltd said, “Demand momentum gained during Q4FY21 (Room air conditioner (RAC) volume: 11,67,000, around 17% YoY & 115% QoQ) lost during Q1FY22 as the peak season sales (Apr-Jun) got impacted due to the second wave of Covid 19. Q1FY22 RACs volume declined around 59% QoQ at 4,78,000. On YoY, volume reported a jump of 139% due to the low base effect.” However, the company’s gross margin improved both on YoY and QoQ basis at 16.8% as it was able to pass price increase.

The management remains optimistic about export prospects for both fully built-up units and components that can potentially emerge over the next 3-4 years.

Should you invest?

Brokerage Sharekhan is bullish on Amber Enterprises with a target price of Rs 3,716, indicating an upside of over 25% from the current market price.

“Overall, we believe the company has a long runway for growth with multiple growth drivers across its product verticals Amber is currently trading at a P/E ratio of 53 times and 37 times its FY2023E and FY2024E earnings, which we believe leaves further room for an upside,” Sharekhan said.

However, it added that lower demand due to economic slowdown (also due to Covid-19) might impact revenue growth momentum.

During the June quarter, Amber saw a drop in RAC demand during the peak summer season especially in the last 10 days of April 2021 and in May and June due to the second wave-induced lockdown. However, as the lockdown restrictions were eased off, the industry witnessed a surge in the end consumer demand for ACs in the month of June 2021.

Kolkata-based SMIFs Limited has an ‘Accumulate’ call on Amber Enterprises with a price target of Rs 3,072. “We believe demand will improve starting Q2 and expect the company to post decent volume growth (over 20%) in FY22. The third wave of Covid, if any, could pose demand challenges in the near term. We remain positive on the company’s mid-to-long-term potential and maintain an ‘Accumulate’ rating,” it added.