Axis Securities has a buy call on Amber Enterprises India with a target price of Rs 954.The current market price of Amber Enterprises India is Rs 827.Time period given by the brokerage is one year when Amber Enterprises India price can reach the defined target.
Investment rationale by the brokerage-Market leader in domestic RAC, OEM/ODM industry: Amber is the market leader leader in the OEM/ODM industry with 55.4% share in volume terms (outsourced market).
AELs share stands at 19.1% in the overall RAC market in terms of volume.
Key customers include Godrej, Bluestar, Daikin, Hitachi, LG, Panasonic, Voltas, Whirlpool and Carrier Midea which together account for 75% of the market share.Changing Climatic Conditions: The increasing trend of warmer summers has necessitated higher cooling requirement in peak summer from March to May onwards.
The combined effect of climate change and an evolving El Nio could make 2019 the hottest year ever as per IMD.
Given the strong correlation of RAC demand to increases in temperature, the RAC sales are bound to increase as we approach summer.Recent acquisition to be EPS and RoCE accretive: We believe that Sidwal Refrigeration Industries Pvt Ltd (SRIPL) is a strategic fit in Ambers portfolio, owing to 1) leadership position in railways (50% share) and metro, 2) supplier of choice for Defence where SRIPL has 80% share, 3) high entry barriers and long approval cycles, 4) diversification into Mobile Transportation Air Conditioning, HVAC etc which are the core business differentiators for Amber.
We expect the acquisition to be EPS and RoCE accretive given asset light, debt light business of Sidwal Refrigeration.