Amber Enterprises India LTD Beat The Heat

Edelweiss Professional Investor Research
Insightful. Independent. Decisive.
Amber Enterprises India Ltd
Utkarsh Nopany
Research Analyst
utkarsh.nopany@edelweissfin.com Date: 16th April 2019
Long Term Recommendation
Beat the heat
Amber Enterprises India (Amber) is the largest contract manufacturer of residential air Utkarsh Nopany
conditioners (RAC) in India, with 55% market share. With the acquisition of Sidwal, the company Research Analyst
will enjoy dominant position in HVAC segment in Indian Railways/Metros (50% share) and Defence utkarsh.nopany@edelweissfin.com
(80%) as well. The company has a strong competitive edge over peers in the form of enhanced
Praveen Sahay
capabilities of manufacturing all the RAC components (except compressor), wide geographical Research Analyst
presence near to customers’ plants and a strong in-house R&D team. Its RAC & RAC component praveen.sahay@edelweissfin.com
revenue has grown 2x industry leader Voltas during FY13-18 primarily due to increased wallet
share from existing customers and addition of new customers. The company enjoys stable CMP INR: 826
operating margin (8-10%) and return ratios (15-18%) and has a strong balance sheet with projected Rating: BUY
net debt/EBITDA at 0.61x in FY19. We estimate Amber’s revenue and operating profit to clock 19%
and 24%, CAGR, respectively, during FY19-21 led by improved demand for RAC and full Target Price INR: 1,050
contribution of newly acquired entities. RoCE is also projected to remain at a healthy 16-19% over Upside: 27%
the next two years. Initiate coverage with ‘BUY’ and TP of INR 1,050 (27% upside).
Catalysts in place to propel RAC penetration in India
RAC penetration in China’s urban areas catapulted from 31% in CY00 to 112% in CY10 primarily due
to surge in per capita income from USD756 to USD2,892; rural RAC penetration too has surged over
the past two decades. We expect similar trend to unfold in India over the next decade led by
expectation of jump in per capita incomes and rising humid temperatures. Moreover, better access
to electricity, easy financing schemes, rising urbanisation & premiumisation trends and deepening
distribution reach of white goods in the country are additional catalysts. US-based IEA estimates
Bloomberg: AMBER:IN
India to account for ~25% of global RAC demand by CY50.
Structural drivers to fuel RAC contract manufacturing share from 34% in FY17 to 44% in FY22 52-week
621 / 1,202
The share of contract manufacturing in India’s RAC industry is estimated to catapult from 34% in range (INR):
FY17 to 44% in FY22. This will primarily be led by AC brands’ preference for asset-light models and
low RoCE in the capital/labour intensive outsourcing business. Moreover, the hike in import duty on Share in issue (cr): 3.1
complete built units (CBU) RAC (~15% of domestic RAC industry) from 10% to 20% in September
M cap (INR cr): 2,597
2018 is envisaged to enhance business opportunities for the outsourced RAC industry.
Avg. Daily Vol.
Amber set to outstrip the fast growing RAC segment over the medium-term 3/24
Amber is the largest RAC contract manufacturer in India, with ~55% market share in the outsourced BSE/NSE :(‘000):
RAC industry. During FY13-18, the company’s revenue from RAC and RAC components grew 2x Promoter
industry leader, Voltas. We believe, Amber has a strong business risk profile due to: a) capability to 44.02
Holding (%)
manufacture all RAC components (except compressor); b) diversified manufacturing locations in
proximity to customers’ plants; c) benefits of economies of scale (~20% share in domestic RAC
industry) along with stable operating margin & return profile; d) diversified customer base (caters to
almost all leading AC brands); and e) diversification of revenue stream through the inorganic route.
Outlook & valuation: Bright prospects in a sunshine industry; Initiate with ‘BUY’
We initiate coverage on Amber with ‘BUY’ recommendation and TP of INR 1,050, entailing 27%
upside potential. Given that RoCE in the contract manufacturing business is significantly lower than
that of brands, contract manufacturers should ideally trade at a discount to brand owners. However,
we believe the multiple should be adjusted for superior revenue growth profile of Amber vs brand
owners. On an adjusted basis, we believe Amber stock can fetch EV/EBITDA multiple of 12x, which
is at a 13% discount to the multiple enjoyed by the company since listing. Key risks include loss of
major customers, unfavourable weather condition impacting RAC demand and sharp volatility in
commodity prices & forex fluctuations.
Year to March FY17 FY18 FY19E FY20E FY21E

Revenues (INR Cr) 1,652 2,118 2,588 3,200 3,687
Rev growth (%) 51.7 28.2 22.2 23.6 15.2
EBITDA (INR Cr) 132 184 186 243 286
PAT (INR Cr) 23 63 69 99 121
EPS (INR) 9.2 19.7 22.0 31.5 38.4
EPS Growth (%) (17.2) 114.2 11.3 43.5 21.9
P/E (x) 89.6 41.8 37.6 26.2 21.5
P/B (x) 5.4 2.9 2.7 2.5 2.3
RoACE (%) 12.9 16.8 13.0 16.3 18.6
RoAE (%) 7.0 9.9 7.5 10.1 11.3
Date: 15th April, 2019

Table of Contents
Structure ............................................................................................................................. 3
Focus Charts 1 ..................................................................................................................... 4
Focus Charts 2 ..................................................................................................................... 6
Focus Charts 3 ..................................................................................................................... 7
I. RAC preferred play in Indian white goods consumer durables ....................................... 8
II. Whether low ROCE generating business can be a good investment bet? ...................... 11
III. Amber should trade at what valuation? ........................................................................ 15
IV. Financial Analysis .......................................................................................................... 16
Outlook and Valuations ...................................................................................................... 19
Peer comparison - Valuations ............................................................................................ 21
Business Overview ............................................................................................................. 22
Key Management ............................................................................................................... 23
Timeline .............................................................................................................................. 24
Financials ............................................................................................................................ 25
Annexure ............................................................................................................................ 26

Structure
Orient Electric Ltd
Structure
Amber is expected to deliver PAT growth of 32.3% CAGR over FY19-FY21 to be driven by increased sales (on expectation of
improved RAC demand in the domestic market coupled with full contribution from newly acquired entities) and
improvement in operating margin (due to favorable base effect and benefits of operating leverage).
PAT growth will be mainly driven by Amber’s ROCE is projected to remain at We recommend a ‘BUY’ with TP of
increased sales and improvement in healthy level over the next two years INR 1,050/share, valuing the stock at
operating margin 12x on FY21 EBITDA estimates
FY18 FY19E FY20E FY21E FY18 FY19E FY20E FY21E EV/EBITDA (x) FY21E EBITDA Target
Revenue 2,118 2,588 3,200 3,687 ROE (%) 9.9 7.5 10.1 11.3 12x 286 1,050
EBITDA margin 8.7 7.2 7.6 7.8 ROCE (%) 16.8 13.0 16.3 18.6
Interest 54 29 33 38
PAT 62 69 99 121
EPS growth of 32.3% over FY19-FY21  FY19-21E RoCE of 16-19%  At 12x of FY21E EBITDA
Upside of 27%

Focus Charts
Orient Electric Part
Ltd I – RAC preferred play in Indian white goods consumer durables
Focus Charts
India has low penetration in all the white goods space China’s RAC penetration up sharply on rising income level
China 2000 2005 2010 2015 2017
100%
Urban
80% Per Capita Income 756 1300 2892 4804 6066
AC penetration 31 81 112 115 129
60% WM peneration 91 96 97 92 96
Refrigerator penetration 80 91 97 94 98
40% TV penetration 117 135 137 122 124
20%
Rural
0% Per Capita Income 276 403 896 1759 1780
RAC WM Refrigerator TV AC penetration 1 6 16 39 53
WM penetration 29 40 57 79 86
India World Refrigerator penetration 12 20 45 83 92
TV penetration 49 84 112 117 120
India experiences hotter climate condition, but the country’s RAC penetration is lower than major RAC consuming countries
No. of
Avg
RAC demand months
RAC demand Population – 2017 Per capita income Monthly Max
Particulars (per 000’s above 24
– 2017 (in 000’s) (in mn) in USD (2018) Temp in a year
person) degree -
– 2015
2015
China 43,487 139 31 9,633 20 0
Japan 8,925 13 70 40,106 23 0
USA 7,958 33 24 62,518 20 0
India 4,890 134 4 2,016 31 6
Brazil 2,758 21 13 9,127 27 12
Indonesia 2,253 26 9 3,789 27 12
Vietnam 1,863 10 19 2,788 29 8
Thailand 1,322 7 19 7,084 30 11
Australia 982 2 40 56,698 29 6
World 96,049 753 13 17,300 - -
India’s per capita income to grow to $3,040 by CY2023 India to account for 25% of global RAC demand by 2050
India's per capita income (in USD)

3500
3000
2500
2000
1500
1000
500
0
2000 2005 2010 2015 2018 2023

Focus Charts
Orient Electric Ltd
Outsourced RAC share to rise from 34% in FY17 to 44% in FY22..
Focus Charts
..due to asset light model followed by brands to improve RoCE
100% Operating RoCE (%) - FY18
16%
80% 34%
44% 155%
60%
40% 84%
66% 66%
56% 54%
20%
22% 28%
17%
0%
FY12 FY17 FY22
Captive Outsourced Amber Blue Star IFB Ind Havells Voltas Whirlpool
Hike in import duty on CBU AC from 10% to 20% in Sep’18.. ..may result in lower RAC imports in India in future
20% 8000 35%
7000 30%
15% 6000 25%

5000 20%
4000 15%
10%
3000 10%
2000 5%
5% 1000 0%
0 -5%
FY16 FY17 FY18 10MFY19
0%
Prior to Sep 2018 Post Sep 2018 Amount (INR crore) % change (y-o-y)
Source: China Statistical Handbook; IEA; IMF; Ministry of Commerce; Company; Edelweiss Professional Investor Research

Focus Charts
Orient Electric Ltd
Focus Charts
Part II - Story in a Nutshell: Whether low ROCE generating business can be a good investment bet?
Amber AC business revenue grew at double the pace of Voltas.. ..due to addition of all the major RAC brands
Revenue Growth (y-o-y) Period Customer addition

Prior to FY12 LG, Voltas
100%
FY12 Whirlpool
80%
FY13 Godrej, Panasonic
60%
FY14 Blue Star
40%
FY15 -
20%
FY16 Daikin, Hitachi
0% FY17 -
FY13 FY14 FY15 FY16 FY17 FY18
-20% FY18 Micromax, Vestar, Cruise
Voltas UCP division Amber AC & AC components FY19 Carrier, Havells, Flipkart
Amber has a strong business risk profile due to its capabilities to

..and multi-geographical presence near to its customers
manufacture all the RAC components (except compressor)..
RAC manufacturing cost break-up
10%
30%
20%
10%
20%
Compressor Heat Exchangers Sheet Metal PCB Motors
Amber operating margin relative stable during FY14-FY18 Amber generated healthy ROCE of 15% during FY14-FY18
2000 11.0% 20.0%
18.0%
1600 10.0%
16.0%
1200 9.0%
14.0%
800 8.0%
12.0%
400 7.0% 10.0%

FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18
Net Sales (INR cr) - Standalone EBITDA margin (%) Operating RoCE (%) - Standalone 5-year avg RoCE (%)
Source: Company, Edelweiss Professional Investment Research

Focus Charts
Orient Electric Ltd
Focus Charts
Part III - Story in a Nutshell: Amber should trade at what valuation?
Amber to trade at a steep discount to brands, but valuation multiple should be adjusted for higher revenue growth
Sales Sales CAGR Operating ROCE 1 year fwd Amber implied

Company Name
(FY18) (5-year) (FY18) EV/EBITDA multiple^
Amber – Consolidated 2111 19% 17%
Havells – standalone 8139 13% 54% 29.2 14
Amber – AC and AC components 1808 25% 17%*
Voltas – UCP Segment growth 3226 12% 66%* 19.6* 11
Average - Target multiple for Amber 12
*Operating ROCE and valuation multiple are calculated at company level; ^Amber implied multiple is calculated as brand owners valuation multiple *
Adjusted for RoCE of brand owners vs Amber * Adjusted for revenue growth of brand owners vs Amber

Investment Hypothesis
Orient Electric Ltd I. RAC preferred play in Indian white goods consumer durables
India’s white goods consumer durables market has clocked 15% CAGR to INR 107,200 crore over
CY13-18. This was driven by better access to electricity, improved affordability due to rise in per
capita incomes, easy financing schemes, rising urbanisation & premiumisation trends and
deepening distribution reach of white goods in the country.
Indian White Goods Market Size CAGR – Replacement

Penetration Outlook Remarks
CD Industry (INR crore) CY13-CY18 Cycle (Years)
Washing Machine Penetration level low due to availability of cheap
10800 10% 13% 10-12 Positive
(WM) labour
Lowest penetration level;
Room AC Very Segment witnessing a shift towards inverter ACs;
16500 13% 8% 9-10
(RAC) Positive Highly competitive segment due to presence of many
players
Very Higher utility to consumers compared to WM/RACs;
Refrigerator 29600 19% 31% 13-15
Positive Segment largely dominated by foreign players
Highest penetration level;
Category witnessing upgradation to LCD/LED/Smart
Television 50300 15% 65% 6-7 Neutral
TVs;
Sharp price erosion due to entry of Chinese players
Industry 107200 15%
Source: Industry
White goods penetration to rise at faster clip over the next decade
Penetration of white goods (especially RAC and refrigerators) in urban and rural areas in China’s
households jumped sharply following spurt in per capita incomes. RAC penetration in urban areas
catapulted from 31% in CY00 to 112% in CY10 primarily due to increase in per capita incomes from
USD 756 to USD 2,892. Rural RAC penetration too has surged over the past two decades. We expect
similar trend to unfold in India over the ensuing decade.
Penetration China India
Urban 2000 2005 2010 2015 2016 2017 FY16
Per Capita Income ($) 756 1300 2892 4804 4840 6066 3158
Urban HH% 36% 43% 50% 56% 57% 59% 32%
AC 31 81 112 115 124 129 33
Refrigerator 80 91 97 94 96 98 54
Color TV set 117 135 137 122 122 124 86
Washing Machine 91 96 97 92 94 96 29
Rural 2000 2005 2010 2015 2016 2017 FY16
Per Capita Income ($) 276 403 896 1759 1780 2239 718
Rural HH% 64% 57% 50% 44% 43% 41% 68%
AC Penetration 1 6 16 39 48 53 10
Refrigerator 12 20 45 83 90 92 16
Color TV set 49 84 112 117 119 120 52
Washing Machine 29 40 57 79 84 86 6
Source: China Statistical Handbook; National Family Health Survey, Edelweiss

Orient Electric Ltd Indian RAC market vs Global RAC market
India has lowest RAC penetration among major consuming countries
India is the fourth largest RAC consuming country in the world. The country experiences hotter
climatic conditions than the top 3 global RAC consuming countries and is also projected to become
the largest populated country in the world by CY24. However, it has the lowest RAC demand per
1,000 persons at 4x vs 24-70x for the top-3 countries due to low per capita income in relative terms.
RAC demand Per capita Avg Monthly No. of months

RAC demand – Population –
Particulars (per 000’s income in USD Max Temp in a above 24 degree -
2017 (in 000’s) 2017 (in mn)
person) (2018) year – 2015 2015
China 43,487 139 31 9,633 20 0
Japan 8,925 13 70 40,106 23 0
USA 7,958 33 24 62,518 20 0
India 4,890 134 4 2,016 31 6
Brazil 2,758 21 13 9,127 27 12
Indonesia 2,253 26 9 3,789 27 12
Vietnam 1,863 10 19 2,788 29 8
Thailand 1,322 7 19 7,084 30 11
Australia 982 2 40 56,698 29 6
World 96,049 753 13 17,300 - -
Source: JRAIA; IMF; World Bank
RAC penetration in India to catapult fuelled by rising incomes and humid climate condition
With expected increase in per capita income and rising humid temperature, India could see a sharp
increase in household ownership of AC over the ensuing decade. According to US-based IEA, India
is projected to account for almost one-fourth of the global RAC demand by CY50 (5% currently).
India to account for roughly one-fourth of global RAC demand by CY2050

Orient Electric Ltd
Role of RAC outsourcing in India
RAC contract manufacturing share to rise from 34% in FY17 to 44% in FY22
The share of contract manufacturing in India’s RAC industry has jumped from 16% in FY12 to 34%
in FY17 and projected to grow to 44% in FY22 (source: Amber DRHP report). This will primarily be
driven by: a) asset-light model followed by brand owners to focus more on innovation, marketing
& distribution; b) low RoCE due to capital/labour intensive nature of the outsourcing business; and
c) hike in custom duty on complete built units (CBU) & RAC components.
RAC contract manufacturing share to rise from 34% in FY17 ..due to asset light model followed by brand owners on
to 44% in FY22.. account of low RoCE generated in outsourcing business
100% Operating RoCE (%) - FY18
90% 16%
80% 34%
44%
70% 155%
60%
50%
40% 84%
30% 66% 66%
56% 54%
20%
22% 28%
10% 17%
0%
FY12 FY17 FY22
Amber Blue Star IFB Ind Havells Voltas Whirlpool
Captive Outsourced
Source: Amber DRHP Report, Edelweiss Professional Investor Research

Operating RoCE is calculated as Core EBIT (excluding other income) divided by Average Net Operating Capital Employed (Networth + Minority
Interest + Total Debt – Cash & Liquid Investments – Investments - CWIP)
Hike in import duty may boost share of outsourced RAC industry in the near-future
The value of imported CBUs of AC and its components in India is pegged at ~INR 8,000 crore in FY19.
India’s AC import bill has been growing at 20-30% p.a. over the past three years. The government
hiked import duty on CBU AC (account for ~15% of domestic RAC industry) from 10% to 20% in Sep
2018 to incentivise domestic production. This, we believe, will enhance business opportunities for
the outsourced RAC industry in the near-future.
Hike in import duty on CBU AC from 10% to 20% in Sep’18.. ..may result in lower RAC imports in India in future
20% 8000 35%
7000 30%
6000 25%
15%
5000 20%
4000 15%
10% 3000 10%
2000 5%
5% 1000 0%
0 -5%
FY16 FY17 FY18 10MFY19
0%
Prior to Sep 2018 Post Sep 2018 Amount (INR crore) % change (y-o-y)
Source: Ministry of Commerce; Edelweiss Professional Investor Research
10

Orient Electric Ltd II. Whether low ROCE generating business can be a good investment bet?
Amber’s revenue to outpace fast-growing RAC industry
Voltas, the industry leader, has consistently increased its AC market share from 18.4% in FY13 to
22% in FY18. During the same period, Amber’s revenue from AC and AC components has grown at
almost double the pace—at 25% CAGR vs 12% CAGR of Voltas’ UCP division. This is primarily
attributable to increased wallet share from existing AC clients and addition of new customers.
CAGR
Particulars FY13 FY14 FY15 FY16 FY17 FY18
(FY13-FY18)
Voltas AC Market Share 18.4% 19.8% 20.8% 21.0% 21.4% 22.0%
Revenue Growth (%)
Voltas - Unitary Cooling Division 19% 12% 22% 0% 21% 6% 12%
Amber - AC & AC components 95% 21% 28% 0% 58% 25% 25%
Amber - Consolidated 62% 11% 26% -11% 52% 28% 19%
Going ahead, we believe, Amber will continue to outpace the domestic RAC industry growth led by:
a) addition of a few major AC brands to its kitty in FY19 (Carrier, Havells, etc); and b) expectation of
higher wallet share from existing clients on account of hike in custom duty and cross selling of PCB
& electric motors to existing customers.
Strong business risk profile on enhanced capability, multi-geography locations and large scale
Amber is bolstered by strong manufacturing capability in the RAC industry as it can manufacture all
the components (except compressor). It started with manufacture of sheet metal and subsequently
added heat exchangers (2008), electric motors (2012) and PCB (2017). Strong manufacturing
capabilities, diversified manufacturing locations near customers’ plants and benefits of economies
of scale (~20% RAC industry market share) enhance Amber’s business risk profile.
% of AC mfg Amber
AC Parts Remarks
costs capabilities
Almost all players import compressors as it requires large economies of scale to be viable. Higli
Compressor 30% No is the only company making compressors in India (capacity of 1 mn units) to supply sister
company, Hitachi
Heat Exchangers 20% Yes Most players procure from OEMs like Amber Enterprises
Sheet Metal 10% Yes Decision for outsourcing & in-house manufacturing differs from company to company
PCB is generally not manufactured by any of the AC players; Amber acquired IL JIN & Ever in
Printed Circuit Board (PCB) 20% Yes
FY18 to increase its wallet share among existing customers
Most players import motors; Amber acquired PICL in 2012 to increase its wallet share among
Electric Motors 10% Yes
existing customers
11

Orient Electric Ltd
Multi Geographic Plant Location near to customers plant reduces competition to an extent
Source: Amber website
Diversified customer base

Amber’s sales to top-5 customers accounted for 78% of its revenue in FY18 (against top 5 AC brand
market share of 75%). It caters to almost all the leading domestic RAC brands in India (except
Samsung). We believe, its revenue will not be materially impacted in case of loss of market share
of any brand as it will be compensated by higher business from other brands.
The list of major customer additions in the past few years are provided below:
Period RAC customer addition
Prior to FY12 LG, Voltas
FY12 Whirlpool
FY13 Godrej, Panasonic
FY14 Blue Star
FY15 -
FY16 Daikin, Hitachi
FY17 -
FY18 Micromax, Vestar, Cruise
FY19 Carrier, Havells, Flipkart
12

Orient Electric Ltd
Diversification of revenue stream
Currently, Amber generates ~85% revenue from sale of AC & AC components and the balance (15%)
from sale of non-AC components (manufactures plastic components of various white goods
products). The company has recently acquired IL JIN/Ever to enter in PCB (used in almost all white
goods products) and Sidwal Refrigeration Industries (supplies AC units to Indian Railways, Metro,
Bus, Telecom, etc). With the recently acquired entities expected to start contributing meaningfully
from FY20, management projects the share of non-AC and components business to rise from 30%
in FY18 to 50% over the next 3-5 years.
Stable operating margin and return ratios

Amber’s operating margin has been relatively stable (8-10% range) over the past 5 years, reflecting
its ability to pass on any volatility in raw material cost to consumers. The company has a price
escalation clause wherein any sharp volatility in raw material cost is passed on to consumers with
a quarter’s lag. Furthermore, it has generated an average RoCE of 15% over the past 5 years.
Amber’s standalone financials account for 93% of its total consolidated operating profit.
Amber operating margin relative stable during FY14-FY18 Amber generated average ROCE of 15% during FY14-FY18
2000 11.0% 20.0%
18.0%
1600 10.0%
16.0%
1200 9.0%
14.0%
800 8.0%
12.0%
400 7.0% 10.0%

FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18
Net Sales (INR cr) - Standalone EBITDA margin (%) Operating RoCE (%) - Standalone 5-year avg RoCE (%)
Source: Company, Edelweiss Professional Investor Research
Healthy cash flow provides growth visibility in the form of organic or inorganic expansion
Management has expanded Amber’s operations over the past one decade organically and
inorganically through a mix of debt, equity and internal accruals (refer to table xxx). It has recently
entered in to an agreement to acquire 80% stake in Sidwal to diversify operations and reduce time
period of ~5 years required in getting approvals to apply for Indian Railways/Metro orders.
Timeline Event
2004 Started Dehradun Factory Unit – 4
2008 Started Noida Factory Unit
2009 Started Dehradun Factory Unit – 5
2010 Started Kasna, Kalamb, Pune and Dehradun Unit – 6
2012 Started Jhajjar unit
2012 Acquired PICL
2017 Acquired IL JIN
2018 Acquired Ever
2019 Acquired Sidwal
2020 To set up a new unit in South India
13

Orient Electric Ltd
Given that Amber is projected to generate annual cash profit of INR160 crore plus over the next
two years and a healthy balance sheet (with peak net debt/EBITDA to remain below 1.5x), we
believe the company could comfortably scout for further growth opportunities in the form of
organic or inorganic expansion over the medium term.
Brief details of recent acquisition

IL JIN and Ever: Both the companies manufacture printed circuit boards (PCB), a critical component
for inverter RAC, refrigerators and other consumer durable products. With government’s focus on
promoting energy-efficient products and expectation of burgeoning demand for inverter RAC,
Amber acquired 70% stake in IL JIN in Oct 2017 for INR 54.4 crore. It is also planning to acquire 70%
in Ever (currently 19%) for ~INR 22 crore by June 2019 to backward integrate its operations.
Management has also agreed to acquire the balance 30% stakes in IL JIN and Ever for a combined
consideration of INR 20-25 crore by FY21-22.
Brief financial details of IL JIN/Ever:

Revenue (INR crore) FY17 FY18 FY19 FY20 FY21
IL JIN 199 334 331 450 525
Ever 141 225 250 288 331
Contribution to Amber's topline 0 100 456 738 856
% of Amber's consolidated topline 0% 5% 18% 23% 23%
EBITDA (INR crore) FY17 FY18 FY19 FY20 FY21
IL JIN 9 9 14 20 24
Ever 5 8 8 10 14
Contribution to Amber's EBITDA 0 3 18 31 37
% of Amber's consolidated EBITDA 0% 2% 9% 13% 13%
RoCE (%) FY17 FY18 FY19 FY20 FY21
IL JIN 14.6 12.9 13.4 16.5 15.6
Ever 3.1 3.8 7.3 6.0 5.9
Amber consolidated 12.9 16.8 13.0 16.0 18.3
Sidwal: Established in 1974, Sidwal is a leading player in the mobile AC segment with a share of 50%
in Indian Railways/Metros and 80% in defence. It also has a pan-India service network to provide
after sales support to customers.
Amber has announced its plan to acquire 80% stake in Sidwal and the balance 20% over the next
two years. The deal is valued at 5.75-6.50x FY19 EBITDA (implying a value of ~INR210-230crore).
The rationale for acquisition of Sidwal was to diversify its revenue stream from RAC to mobility &
commercial AC and also overcome the high entry barrier due to initial time period of 5-7 years to
become eligible for application of Indian Railways/Metros orders. According to the management,
the deal is earnings as well as RoCE accretive to Amber due to Sidwal’s higher margin (~20% plus vs
Amber’s 9-10%), almost nil debt and better return ratios (RoCE of 40% plus vs Amber’s 16-18%).
We have not factored the impact of Sidwal’s acquisition in our financial projection as the deal has
not yet been completed.
14

Orient Electric Ltd III. Amber should trade at what valuation?
Given that the RoCE in the contract manufacturing business is significantly lower than brands,
contract manufacturers should ideally trade at a significant discount to the latter. However, we
believe, the multiple should be adjusted for Amber’s superior revenue growth profile versus brand
owners. On adjusted basis, the stock could trade at an EV/EBITDA of 12x (as shown below).
Sales Sales CAGR Operating ROCE 1 year fwd Amber implied

Company Name
(FY18) (5-year) (FY18) EV/EBITDA multiple^
Amber – Consolidated 2111 19% 17%
Havells – standalone 8139 13% 54% 29.2 14
Amber – AC and AC components 1808 25% 17%*
Voltas – UCP Segment growth 3226 12% 66%* 19.6* 11
Average - Target multiple for Amber 12
^Amber implied multiple is calculated as brand owners valuation multiple * Adjusted for RoCE of brand owners vs Amber * Adjusted for revenue
growth of brand owners vs Amber; *Operating ROCE and valuation multiple are calculated at company level
15

Orient Electric Ltd IV. Amber Financial Analysis
Brief overview of Amber
Amber started contract manufacturing for a leading RAC manufacturer in 2004. Initially, the
company had the capability to manufacture only one component of AC (i.e. sheet metal; accounting
for 10% of total AC manufacturing cost) and then started manufacturing heat exchanger (forms 20%
of AC mfg cost) in 2008. Later, the company acquired PICL in 2012 to foray in manufacturing of
electric motors (forms 10% of AC mfg cost) and acquired IL JIN & Ever in FY18 to enter into PCB
manufacturing (forms 20% of inverter ACs). Recently, the company has announced its plan to
acquire Sidwal to diversify its operations into mobility & commercial HVAC segment.
Year of Gross
Snapshot (FY18) Operations Revenue EBITDA PAT Networth RoCE
acquisition Debt
Manufacturing of RAC and white
Amber SA 1913 171 62 852 50 19.2
goods components
PICL (100%) 2012 Electric Motors 143 9 (1) 25 37 8.6
IL JIN (70%) 2017 Printed Circuit Board (PCB) 334 9 2 24 32 12.9
Ever (70%) 2018 Printed Circuit Board (PCB) 225 5 2 17 15 3.8
Amber Consol 2,118 184 62 893 120 16.8
Revenue to clock 19% CAGR over FY19-21

We estimate Amber’s consolidated revenue to clock 19.4% CAGR to INR 3,687 crore during FY19-
FY21. This will be led by ~15% growth in existing operations (in-line with industry average growth
versus management’s expectation of surpassing it) and impact of recognition of full year revenue
of newly acquired entities (IL JIN and Ever).
The contribution of IL JIN and Ever to Amber’s top line is projected to increase from INR 100 crore
in FY18 to INR 447 crore in FY19, INR 738 crore in FY20 and INR 856 crore in FY21. Note that we
have not considered the impact of the Sidwal acquisition as the deal has not yet been
consummated. If we consider it, revenue is projected to jump to ~INR3,900-4,000 crore by FY21.
Amber revenue to grow at 19.4% CAGR during FY19-FY21 SA revenue share to decline from 93% in FY18 to 72% in FY21
4000 60 100% 7% 5%
7% 17% 23% 23%
3500 50 80% 5%
5% 5%
3000 40 60%
93% 89%
2500 30 40% 78% 73% 72%
2000 20 20%
1500 10 0%
FY17 FY18 FY19P FY20P FY21P FY17 FY18 FY19P FY20P FY21P
Net Sales (INR cr) Sales growth (y-o-y) Standalone (SA) PICL IL JIN/Ever
Source: Edelweiss Professional Investor Research
16

Orient Electric Ltd
Margin recovery to spur 24% EBITDA CAGR during FY19-21
The company’s operating profit is estimated to post 24% CAGR to INR 286 crore during FY19-21 on
expectation of recovery in margins of standalone operations as well as newly acquired entities (IL
JIN and Ever). Operating margin of standalone operations is projected to decline from 9.0% in FY18
to 7.8% in FY19 primarily due to temporary impact of sharp volatility in raw material prices and
forex, which is typically passed on to consumers with a quarter’s lag.
However, standalone margin is expected to regain normal level of ~9.0% over the next two years.
Operating margins of IL JIN and Ever are also projected to improve by 50-100bps over the next two
years predominantly due to benefit of economies of scale.
Amber EBITDA margin to improve from 7.2% in FY19 to 7.8% in ..on margin recovery of SA operations and IL JIN/Ever
FY21..
300 9.0% 10.0%
9.0%
250 8.5% 8.0%
7.0%
200 8.0% 6.0%
5.0%
150 7.5% 4.0%
3.0%
100 7.0% 2.0%
FY17 FY18 FY19P FY20P FY21P FY17 FY18 FY19 FY20 FY21
EBITDA (INR crore) EBITDA margin Standalone PICL IL JIN Ever
Balance sheet to remain healthy on strong cash generation

Amber’s operations are working capital intensive with operating cycle of ~1.5-2.0 months.
Management has planned to set up a greenfield plant in South India to geographically diversify its
operations, which will entail capex of around INR 100 crore spread over FY20-21. Despite higher
working capital requirement to support increase in scale in operations and growth capex
commitment (excluding Sidwal acquisition), the company’s debt protection metrics (net
debt/EBITDA) are projected to remain below unity level till FY21. Even after considering the impact
of Sidwal acquisition, net debt/EBITDA is estimated to remain below 1.5x by FY21.
Amber operating cycle is the range of 1.5-2 months period Net Debt/EBITDA is projected to remain below unity level
60 400 3.0
55
300 2.3
50
200 1.5
45
40 100 0.8
35
0 0.0
30 FY17 FY18 FY19P FY20P FY21P
25 -100 -0.8
FY13 FY14 FY15 FY16 FY17 FY18 FY19P FY20P FY21P
Net Debt (INR cr) Net Debt/EBITDA (x)
17

Orient Electric Ltd
Operating RoCE to rise to 20% in FY21
The company has generated stable operating RoCE in the 13-14% range in the past, which improved
to 17% in FY18 due to better utilisation of existing facilities. We estimate Amber’s operating RoCE
to improve to 20% by FY21 due to improvement in operating margin coupled with better sweating
of newly acquired assets (IL JIN and Ever). However, RoNW is expected to remain at moderate a
level of 10-11% during the period due to low financial leverage.
Operating RoCE to improve from 17% in FY18 to 20.0% in FY21 RoE to remain at moderate level on low financial leverage
20.0% 14.0 2.00
18.0% 12.0 1.50
16.0% 10.0 1.00
14.0% 8.0 0.50
12.0% 6.0 0.00

FY14 FY15 FY16 FY17 FY18 FY19P FY20P FY21P
10.0%
RoNW (%) Debt/Equity (x)
FY14 FY15 FY16 FY17 FY18 FY19P FY20P FY21P
Source: Company, Edelweiss Professional Investor Research
18

Outlook and Valuation
Orient Electric Ltd
We initiate coverage on Amber with Outlook and Valuations
‘BUY’ recommendation and TP of INR 1,050, entailing 27%
upside based on current market price. Our TP is based on 12x FY21E EBITDA, which is at a 13%
discount to the multiple enjoyed by the company since listing. Key risks include loss of major
customers, unfavourable weather condition impacting RAC demand and sharp volatility in
commodity prices & forex fluctuations.
Relative Valuation
Share Market
Name Sales CAGR EBITDA CAGR EPS CAGR
Price Cap
FY19 FY20 FY21 FY19-FY21 FY19 FY20 FY21 FY19-FY21 FY19 FY20 FY21 FY19-FY21
Havells 752 47026 10174 11808 13577 16% 1265 1532 1804 19% 13.6 16.6 19.8 20%
Voltas 622 20573 7305 8160 9248 13% 712 836 950 16% 17.1 20.0 23.2 17%
Whirlpool 1419 18001 5516 6342 7318 15% 634 766 885 18% 32.5 38.9 46.1 19%
Blue Star 678 6532 4966 5871 6667 16% 302 396 481 26% 15.7 21.8 27.7 33%
JCH 1973 5365 2327 2714 3204 17% 175 229 302 31% 33.4 46.5 65.0 40%
IFB 860 3483 2597 3133 3664 19% 142 230 306 47% 16.3 30.8 43.1 63%
Amber 826 2597 2588 3200 3687 19% 186 243 286 24% 22.0 31.5 38.4 32%
Average 16% 21% 32%
Name P/E PEG EV/EBITDA RoE
FY19 FY20 FY21 FY19-FY21 FY19 FY20 FY21 FY19 FY20 FY21
Havells 55.1 45.2 38.0 1.86 36.1 29.8 25.3 21.3 22.8 23.9
Voltas 36.5 31.1 26.8 1.61 29.3 25.0 22.0 13.8 14.7 15.3
Whirlpool 43.7 36.5 30.8 1.61 26.8 22.2 19.2 20.6 20.7 21.0
Blue Star 43.3 31.1 24.5 0.74 23.2 17.7 14.6 17.7 22.6 25.7
JCH 59.1 42.5 30.4 0.77 29.5 22.6 17.1 15.8 18.7 21.7
IFB 52.8 27.9 20.0 0.32 24.1 14.8 11.2 11.0 18.0 21.0
Amber 37.6 26.2 21.5 0.67 14.6 11.0 9.3 7.5 10.1 11.3
Average 46.8 34.3 27.4 1.1 26.2 20.4 16.9 15.4 18.2 20.0
Risk-reward Extremely Favourable
Based on revenue CAGR of 19%, EBITDA margin of 7.8% and applying an EV/EBITDA multiple
Price Target INR 1,050
of 12x
Bull Case INR 1,261
of 12x
Base Case INR 1,050
of 12x
Based on revenue CAGR of 10%, EBITDA margin of 7.5% and applying a EV/EBITDA multiple
Bear Case INR 805
of 10x
19

Business Overview
Orient Electric Ltd
Company Description
Business Overview
Amber, incorporated in 1990, is the largest contract manufacturer of residential air-conditioner (RAC) in India (with 55% market
share) and also manufactures components for white goods. Amber started contract manufacturing for a leading RAC manufacturer
in 2004. Initially, the company had the capability to manufacture only one component of AC (i.e. sheet metal; accounting for 10%
of total AC manufacturing cost) and subsequently added heat exchangers (20% of AC manufacturing cost) in 2008. The company
acquired PICL in 2012 to venture in to manufacturing electric motors (10% of AC manufacturing cost) and acquired IL JIN & Ever
in FY18 to enter in to PCB manufacturing (20% of inverter AC cost). The company has twelve manufacturing facilities across India.
Recently, Amber has announced its plan to acquire Sidwal to diversify its operations in to mobility & commercial HVAC segment.
Amber is engaged in contract manufacturing of RAC and also supplies components of RAC and other white goods. The
Business Model company has recently announced its plan to diversify its presence in mobility & commercial AC segments through the
inorganic route. Over the long run, management intends to grow its operations only in the HVAC segment.
Amber is the largest contract manufacturer of RAC in India, with a market share of 55%. With acquisition of Sidwal, the
Strategic Positioning
company will also enjoy dominant position in Indian Railways/Metros (50% share) and defence (80% share).
Amber has a strong competitive edge over peers in the form of enhanced capabilities of manufacturing all the components
Competitive Edge of RAC (except compressor), wide geographical presence near to customers’ plants and a strong in-house R&D team. The
company also provides its services to almost all the leading RAC brands in India.
Amber’s RAC & RAC component revenue has grown at almost double the pace of industry leader Voltas during FY13-18
primarily due to increased wallet share from existing customers and addition of new customers. The company enjoys stable
Financial Structure operating margin (8-10%) and return ratios (15-18%). It has a strong balance sheet position, with projected net debt/EBITDA
at 0.61x in FY19. With expectation of healthy annual cash generation of INR 160 crore plus and strong debt protection
metrics, Amber can pursue growth opportunities in the future through organic or inorganic route.
Key Competitors Amber’s key competitors are Lloyd Electricals, Zamil, Subros, etc.
Rise in disposable incomes, increase in electrification & humid climate conditions and rapid urbanisation are key revenue
Industry Revenue Drivers
drivers of this industry.
We are initiating coverage on Amber with ‘BUY’ recommendation and TP of INR 1,050 per share, offering 27% upside
Shareholder Value
potential to investors. Our TP is based on 12x FY21E EBITDA, which is at a 13% discount to the multiple enjoyed by the
Proposition
company since listing.
20

Amber Enterprises India Ltd Key Management
Orient Electric Ltd Key Management
Name Designation Profile
He holds Bachelor’s degree in Engineering from Karnataka University and Master’s degree in Business
Mr. Jasbir Singh Administration from the University of Hull, United Kingdom. He has more than 15 years of experience in the
Chairman & CEO
(Promoter) RAC manufacturing sector. Under his guidance, Amber has initiated the concept of additive manufacturing
solutions.
He holds Bachelor’s degree in Electronic Engineering from Nagpur University and Master’s degree in
Mr. Daljit Singh Information Technology from the Rochester Institute of Technology. He is serving the Board of Amber since
MD
(Promoter) January 1, 2008, and was appointed MD w.e.f. August 25, 2017. He has 12 years’ experience in finance services
and 10 years of experience in the RAC manufacturing sector.
He holds a diploma degree in electrical engineering with specialisation in electronics & television technology
from YMCA Institute of Engineering, Faridabad. He has been associated with Amber since July 2012 and has
Mr. Sanjay Arora Operations – Director 34 years of experience in the manufacturing industry. He is responsible for the operations of Amber. He is also
responsible for heading innovation, security and legal matters of the company. Mr. Arora was previously
associated with Onida Savak, Monica Electronics, Kortek Electronics (India) and LG Electronics India.
He holds a diploma in mechanical engineering from Board of Technical Education UP. He has been associated
Mr. Udaiveer Singh President – RAC with Amber since December 2003 and has 22 years of experience in the manufacturing industry. He is
responsible for the planning and operation of Ambers’ RAC manufacturing facilities.
He holds a bachelor’s degree in electrical engineering from Punjab Technical University and a post graduate
diploma degree in business administration from All India Institute of Management Studies, Chennai. He has
Mr. Sachin Gupta Vice President – RAC been associated with Amber since November 2014 and has more than 14 years of experience in the
manufacturing industry. Mr. Gupta is responsible for business development of the company. Prior to Amber,
he was associated with LG Electronics India and Godrej & Boyce Manufacturing Company.
He holds a bachelor’s degree in commerce (Hons.) from University of Delhi. He is an associate member of the
Mr. Sudhir Goyal Chief Financial Officer Institute of Chartered Accountants of India. He has been associated with Amber since October 23, 2012, and
has over 13 years of experience in the manufacturing industry.
21

Timeline
Orient Electric Ltd
Financial Analysis
Major Milestones
Timeline Event
1990 Year of incorporation
1994 First factory at Rajpura was established
2003-04 Started Dehradun plant for RAC manufacturing for LG
2004 Dehradun factory unit - 4 established and started manufacturing of sheet metal components for captive use
2005-06 Started manufacturing microwave oven for LG
2008 Started Noida Ecotech unit; added plastic extrusion & vaccum forming in product portfolio
2008 Started manufacturing heat exchangers
2009 Started Dehradun factory unit - 5 to manufacture RAC on ODM; finished goods
2010 Started Kasna unit, Kalamb unit and Pune unit to supply sheet metal component to customers
2010 Started Dehradun factory unit - 6 to manufacture RAC on ODM; finished goods
2011 Investment by Green India Venture Fund
2012 Investment by Reliance Alternative Investments Fund - PE I
2012 Started Jhajjar unit
2012 Acquired PICL for consideration of INR 49 crore
2017 Investment by Ascent and exit to Reliance Alternative Investments Fund PE - I
Jan-18 Amber IPO (offer price 855-859)
2017-18 Acquired 70% stake in ILJIN for consideration of INR 54.4 crore
2018 Acquired 70% stake in Ever for consideration of INR 22 crore
2019 Acquisition of 80% stake in Sidwal Refrigeration for consideration of INR 210-230 crore
2020 To set up a manufacturing facility in South India
22

Amber Enterprises India Ltd Financials
Orient Electric Ltd Financials
Income statement (Consolidated)
Year to March FY17 FY18 FY19P FY20P FY21P
Income from operations 1,652 2,118 2,588 3,200 3,687
Direct costs 1,396 1,773 0 0 0
Employee costs 44 50 0 0 0
Other expenses 81 111 2,402 2,957 3,401
Total operating expenses 1,520 1,934 2,402 2,957 3,401
EBITDA 132 184 186 243 286
Depreciation and amortisation 40 49 60 67 72
EBIT 92 135 126 176 214
Interest expenses 64 54 29 33 38
Other income 9 9 7 7 7
Profit before tax 37 89 105 150 183
Provision for tax 14 27 36 51 62
Core profit 23 62 69 99 121
Extraordinary items 0 0 0 0 0
Profit after tax 23 63 69 99 121
Minority Interest 0 0 0 0 0
Share from associates 0 0 0 0 0
Adjusted net profit 23 63 69 99 121
Equity shares outstanding (mn) 2 3 3 3 3
EPS (INR) basic 9.2 19.7 22.0 31.5 38.4
Diluted shares (Cr) 2.4 3.1 3.1 3.1 3.1
EPS (INR) fully diluted 9.2 19.7 22.0 31.5 38.4
Dividend per share 2.1 0.0 4.2 5.7 6.9
Dividend payout (%) 22.6 0.0 19.3 18.1 18.1
Common size metrics- as % of net revenues

Operating expenses 92.0 91.3 92.8 92.4 92.2
Depreciation 2.4 2.3 2.3 2.1 2.0
Interest expenditure 3.9 2.6 1.1 1.0 1.0
EBITDA margins 8.0 8.7 7.2 7.6 7.8
Net profit margins 1.4 3.0 2.7 3.1 3.3
Growth metrics (%)

Revenues 51.7 28.2 22.2 23.6 15.2
EBITDA 13.3 39.6 1.1 30.8 17.7
PBT 3.7 144.6 17.1 43.5 21.9
Net profit (13.7) 170.9 10.9 43.5 21.9
EPS (17.2) 114.2 11.3 43.5 21.9
23

Balance sheet (Consolidated)
As on 31st March FY17 FY18 FY19P FY20P FY21P
Equity share capital 24 31 31 31 31
Preference Share Capital/CCD 34 0 0 0 0
Reserves & surplus 305 861 914 992 1,087
Shareholders funds 363 893 946 1,023 1,118
Long Term Borrowing 248 58 53 45 61
Short Term Borrowing 152 62 180 258 336
Minority interest 0 0 0 0 0
Other Liabilties 13 64 79 97 112
Sources of funds 776 1,078 1,258 1,424 1,628
Gross block 611 746 820 890 960
Depreciation 148 183 243 310 382
Net block 463 563 577 580 578
Capital work in progress 16 15 11 61 111
Total fixed assets 479 578 588 641 689
Intangible Assets 106 167 167 167 167
Investments 0 6 6 6 6
Inventories 269 396 499 583 672
Sundry debtors 310 379 464 542 624
Cash and equivalents 35 134 119 218 325
Loans and advances 10 13 13 13 13
Other current assets 27 43 68 21 7
Total current assets 651 964 1,163 1,378 1,641
Sundry creditors and others 475 650 682 784 891
Provisions 1 1 1 1 1
Total CL & provisions 475 651 683 784 892
Other Assets 14 13 16 16 16
Uses of funds 776 1,078 1,258 1,424 1,628
Book value per share (INR) 152 284 301 325 356
Cash flow statement

Net profit 22 62 69 99 121
Add: Depreciation 40 49 60 67 72
Add: Deferred tax 0 0 0 0 0
Add: Others 0 0 0 0 0
Gross cash flow 62 111 129 166 193
Less: Changes in W. C. -17 -14 171 -5 34
Operating cash flow 79 125 -42 171 159
Less: Capex 81 209 69 120 120
Free cash flow -2 -84 -112 51 39
24

Ratios
ROAE (%) 7.0 9.9 7.5 10.1 11.3
ROACE (%) 12.9 16.8 13.0 16.3 18.6
Current ratio 1.0 1.3 1.3 1.3 1.3
Debtors (days) 69 65 65 62 62
Inventory (days) 59 68 70 67 67
Payable (days) 98 99 83 79 78
Cash conversion cycle (days) 29 35 53 50 50
Debt/EBITDA 3.0 0.7 1.3 1.2 1.4
Debt/Equity 1.1 0.1 0.2 0.3 0.4
Adjusted debt/Equity 1.0 (0.0) 0.1 0.1 0.1
Valuation parameters
Diluted EPS (INR) 9.2 19.7 22.0 31.5 38.4
Y-o-Y growth (%) (17.2) 114.2 11.3 43.5 21.9
CEPS (INR) 28.1 37.9 41.0 52.8 61.4
Diluted P/E (x) 90.6 42.3 38.0 26.5 21.7
Price/BV(x) 5.5 2.9 2.8 2.6 2.3
EV/Sales (x) 1.4 1.2 1.1 0.8 0.7
EV/EBITDA (x) 17.9 14.2 14.7 11.1 9.4
Diluted shares O/S 2.4 3.1 3.1 3.1 3.1
Basic EPS 9.2 19.7 22.0 31.5 38.4
Basic PE (x) 90.6 42.3 38.0 26.5 21.7
Dividend yield (%) 0.2 0.0 0.5 0.7 0.8
25

Amber Enterprises India Ltd Annexure
Nature of Amber is a contract manufacturer of AC and also manufactures components for white goods. The
Industry company has recently announced its plan to venture in to mobility and commercial AC segments.
Penetration of residential ACs (RAC) in Indian households is pegged at mere 8%. In China, rising per capita
incomes propelled RAC penetration in urban (31% in 2000 to 112% in 2010) and rural (6% in 2005 to 53%
Opportunity Size
in 2017) areas. We anticipate similar trend in India (urban and rural areas) over the next one decade led
by expectation of spurt in per capita incomes and rising humid temperature.
Amber’s prudent capital allocation strategy reflects in its stable return ratios over the past few years.
Capital Furthermore, the company has improved its business risk profile by following the concept of additive
Allocation manufacturing solutions for AC and diversification of revenue stream, customer base and geographical
presence.
Amber is expected to benefit from: a) benign AC demand outlook; b) imposition of high import duty on
Predictability completely built unit (CBU) AC; c) conversion of customers in pipeline for newly acquired printed circuit
board (PCB) segment; and d) benefit of operating leverage due to increased scale of operations.
Business Value Drivers
Amber has a strong business risk profile due to: a) its capability to manufacture all components of RAC
(except compressor); b) diversified manufacturing locations is close proximity to customers’ plant; c)
Sustainability benefits of economies of scale along with stable operating margin and return profile; d) diversified
customer base (caters to almost all leading AC brands in India); and e) diversification of revenue stream
via inorganic route (IL JIN/Ever/Sidwal).
Amber is projected to clock higher-than-industry average growth on expectation of sustained market

Disproportionate
share gains in the outsourced RAC industry and sharp spurt in contribution of newly acquired entities (IL
Future
JIN/Ever/Sidwal).
Management has followed the concept of additive manufacturing solutions in the heating, ventilation
Business
and air conditioning (HVAC) segment. Till FY19, Amber was predominantly present in the RAC segment;
Strategy &
recently it entered mobility & commercial AC segments with the proposed acquisition of Sidwal
Planned
Refrigeration. Management is planning to prune the share of RAC from 70% in FY18 to 50% over the next
Initiatives
3-5 years increasing its non-AC components and mobility & commercial AC segment.
Amber’s EPS is estimated to clock 32.3% CAGR during FY19-21 driven by increased sales (on improved
Near-Term
RAC demand coupled with full revenue contribution from newly acquired entities) and improvement in
Visibility
operating margin (due to favourable base effect and benefits of operating leverage).
Over the long term, Amber is expected to be a potential beneficiary of burgeoning AC demand in India
Long-Term
as it enjoys a dominant position in the outsourced RAC industry. After acquisition of Sidwal, Amber will
Visibility
also be one of the leading players in the mobility segment.
Near Term Risk Unfavourable weather condition and sharp volatility in commodity & forex
Long Term Risk Loss of major customers and sharp volatility in commodity prices & forex fluctuations, etc.
26

Orient Electric Ltd

Edelweiss Broking Limited, 1st Floor, Tower 3, Wing B, Kohinoor City Mall, Kohinoor City, Kirol Road, Kurla(W)
Board: (91-22) 4272 2200
VINAY
Digitally signed by VINAY KHATTAR
Vinay Khattar DN: c=IN, o=Personal, postalCode=400072,
st=Maharashtra,
2.5.4.20=87db74ffb17a70c89e8519a4d13e40e
Head Research 93c4bcaba1a64d00f3c841d2fee3fa678,
KHATTAR
serialNumber=cd5737057831c416d2a5f7064c
b693183887e7ff342c50bd877e00c00e2e82a1,
vinay.khattar@edelweissfin.com cn=VINAY KHATTAR

Date: 2019.04.16 11:53:04 +05'30'
Rating Expected to
Buy appreciate more than 15% over a 12-month period
Hold appreciate between 5-15% over a 12-month period
Reduce Return below 5% over a 12-month period
120
110
100
90
(Indexed)
80
70
60
50
40
Jun-18
Nov-18
Dec-18
Apr-18
Feb-19
Jul-18
Oct-18
Feb-18
Sep-18
May-18
Aug-18
Mar-19
Jan-18
Mar-18
Jan-19
Amber Sensex
27

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28

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29

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