Company Update | Consumer Durable

March 25, 2019

Amber Enterprises India Ltd

BUY

CMP

`776

Sidwal’s acquisition to expand product portfolio

Target Price

`910

Event: Amber Enterprises’ (Amber) has approved to enter into the definitive

Investment Period

12 Months

agreements for acquiring 80% stake upfront in the equity share capital of Sidwal

Refrigeration Industries Private Ltd ("Sidwal"), which will include the business of

Sidwal Technologies. The deal valuation are not disclosed but the management

Stock Info

has indicated that the deal value could be worth `180-200 crore for 80% stake

Sector

Consumer Durable

(at 5.5-6x EV/ EBITDA and 10x FY2019E earnings).

Market Cap (` cr)

2,440

Beta

1.0

Sidwal’s background - Sidwal is the leading player in the Mobile (Transportation)

52 Week High / Low

1200/621

Air Conditioning and Refrigeration Industry. It has diversified portfolio of HVAC

Avg. Daily Volume

12,392

solutions to Indian Railways (forms 72% of Sidwal’s revenue), Metro Segments,

Face Value (`)

Defence (9%), Telecom (4%), Bus (9%). It also provide strong post sale support to

BSE Sensex

37,808

its customers - primarily for the Railway, Metro and Bus segment.

Nifty

11,354

Our take on the deal- The acquisition would expand Amber’s portfolio in the

Reuters Code

AMBE.BO

HVAC space in mobile applications. The deal is likely to be funded via a mix of

Bloomberg Code

AMBER.IN

internal accruals and debt where the group debt level would not exceed the

internal threshold limit of 1.5-1.75x EBITDA. They also assured that the deal

Shareholding Pattern (%)

would be EPS/ ROCE accretive as Sidwal has high growth prospects/OPM of 20%

Promoters

44.0

with nil LT debt and low working capital requirements.

MF / Banks / Indian Fls

33.0

Outlook: We remain bullish on the niche space that Amber is in and its expansion

FII / NRIs / OCBs

10.8

plan in the related HVAC space. Q4FY2019 results will be keenly monitored for

Indian Public / Others

12.2

signs of growth as the last “cooler” summer season has spoiled its M9FY2019

results. We expect a CAGR of ~21%/38% in consolidated revenue/ earnings over

Abs.(%)

3m 1yr 3yr

FY2018-20E without taking this acquisition into account (would wait for deal’s

Sensex

7.6

15.6

50.7

fine prints). We maintain BUY with a target price of `910(25x FY2020E EPS).

Amber

(16.3)

(28.9)

Key Consolidated Financials

Y/E March (` cr)

FY2016

FY2017

FY2018

FY2019E

FY2020E

Net Sales

1,089.0

1,651.9

2,128.1

2,778.0

3,125.2

% chg

-11.5

51.7

28.8

30.5

12.5

Net Profit

24.1

25.2

62.3

90.0

114.4

Nidhi Agrawal

% chg

-13.5

4.5

147.4

44.4

27.2

+022 39357600 Ext-6872

EBITDA (%)

10.4

7.9

8.6

7.0

7.5

[email protected]

EPS (Rs)

7.7

8.0

19.8

28.6

36.4

P/E (x)

101.2

96.9

39.2

27.1

21.3

P/BV (x)

9.3

7.3

2.7

2.5

2.3

RoE (%)

9.2

7.5

7.0

9.3

10.7

RoCE (%)

14.1

13.3

13.5

15.4

EV/EBITDA

23.9

20.8

12.8

11.5

9.5

EV/Sales

2.5

1.6

1.1

0.8

0.7

Source: Company, Angel Research

Please refer to important disclosures at the end of this report

Amber Enterprises |Event Update

Sidwal’s details

Sidwal was founded by NRI technocrat Mr. S.S. Sidhu a Mechanical Engineer from

the University of Michigan in 1975. Headquartered in NCR, Sidwal operates 3 fully

integrated facilities in Northern India with the capability to undertake the entire

HVAC manufacturing process in-house. It is the market leader in the Railway and

Metro segments with a track record of supplying 15,000+ HVAC units for mainline

coaches and 2,000+ HVAC units for metro coaches. It also has a dominating

market share in the defence Segment. It has an order book of ` 200 cr with AMC

contracts. FY2019 is expected to be good with 15%+ yearly growth in revenue

and a OPM of 20%+ and a PAT of over ` 23 crore.

Exhibit 1: Turnover of Sidwal

FY16

FY17

FY18

FY19E

Turnover*

116

124

165

195

YoY growth

7.0%

33.1%

18.0%

Source: Company, Angel Research

* Turnover of Sidwal Refrigeration Industries Pvt Ltd & Sidwal Technologies without eliminating

intercompany transactions

Exhibit 2: How acquisition will help Amber?

Source: Company, Angel Research

March 25, 2019

Amber Enterprises |Event Update

Risks to our estimates

Client concentration

Amber’s business is dependent on certain principal customers and the loss of or a

significant reduction in purchases by such customers could adversely affect its

business, financial condition, results of operations and future prospects

Downward trend in OEM/ODM business

In recent years, RAC brands have increasingly outsourced the manufacturing of

their products to OEM/ODM players like Amber. However, there can be no

assurance that they will continue to do so in the future.

Changing preferences, weather advancement in technology

The markets in which company’s customers compete are characterized by

consumers, weather patterns and their rapidly changing preferences, advancement

in technology and other related factors including lower manufacturing costs.

Hence, the company may be affected by any disruptions in the industry.

March 25, 2019

Amber Enterprises |Event Update

Consolidated Profit & Loss Statement

Y/E March (` cr)

FY2016

FY2017

FY2018

FY2019E

FY2020E

Total operating income

1,089.0

1,651.9

2,128.1

2,778.0

3,125.2

% chg

-11.5

51.7

28.8

30.5

12.5

Total Expenditure

975.3

1,521.3

1,944.5

2,582.3

2,892.0

Raw Material

858.5

1,371.2

1,768.8

2,352.9

2,647.1

Personnel

36.5

43.7

49.8

65.0

73.1

Others Expenses

80.3

106.5

125.9

164.4

171.9

EBITDA

113.7

130.5

183.5

195.7

233.2

% chg

10.9

14.8

40.6

6.6

19.2

(% of Net Sales)

10.4

7.9

8.6

7.0

7.5

Depreciation& Amortisation

30.9

40.1

49.0

51.2

54.3

EBIT

82.9

90.4

134.5

144.4

178.9

% chg

7.6

9.1

48.8

7.4

23.9

(% of Net Sales)

7.6

5.5

6.3

5.2

5.7

Interest & other Charges

53.2

63.5

53.8

18.8

15.0

Other Income

3.1

8.8

8.7

7.4

6.3

(% of Sales)

0.3

0.5

0.4

0.3

0.2

Extraordinary Items

Share in profit of Associates

Recurring PBT

32.7

35.7

89.4

133.0

170.2

% chg

-19.0

9.2

150.4

48.8

28.0

Tax

8.6

10.5

27.1

41.2

52.8

PAT (reported)

24.1

25.2

62.3

90.0

114.4

% chg

-13.5

4.5

147.4

44.4

27.2

(% of Net Sales)

2.2

1.5

2.9

3.2

3.7

Basic & Fully Diluted EPS (Rs)

7.7

8.0

19.8

28.6

36.4

% chg

-13.5

4.5

147.4

44.4

27.2

March 25, 2019

Amber Enterprises |Event Update

Consolidated Balance Sheet

Y/E March (` cr)

FY2016

FY2017

FY2018

FY2019E FY2020E

SOURCES OF FUNDS

Equity Share Capital

21.7

23.8

31.4

Reserves& Surplus

240.9

311.1

861.3

937.2

1,033.7

Shareholders Funds

262.6

334.9

892.8

968.7

1,065.2

Minority Interest

Total Loans

326.6

344.9

105.5

100.0

Other Liab & Prov

80.8

46.8

64.4

84.1

94.6

Total Liabilities

670.0

726.6

1,062.7

1,152.8

1,259.8

APPLICATION OF FUNDS

Net Block

536.1

577.5

739.8

789.8

839.8

Capital Work-in-Progress

2.0

3.0

4.0

5.0

6.0

Investments

5.7

55.7

105.7

Current Assets

533.6

650.4

964.0

1,156.5

1,271.1

Inventories

225.8

267.7

395.6

456.7

513.7

Sundry Debtors

247.9

310.4

378.6

456.7

513.7

Cash

18.4

34.7

133.8

154.5

141.3

Loans & Advances

40.6

37.1

28.3

55.6

62.5

Other Assets

1.0

0.5

27.6

33.1

39.8

Current liabilities

445.0

560.0

665.8

869.2

977.8

Net Current Assets

88.6

90.4

298.2

287.3

293.3

Other Non Current Asset

45.3

58.6

19.1

20.0

21.0

Total Assets

670.0

726.6

1062.7

1152.8

1259.8

March 25, 2019

Amber Enterprises |Event Update

Consolidated Cash Flow Statement

Y/E March (`cr)

FY2016

FY2017

FY2018

FY2019E FY2020E

Profit before tax

32.7

38.4

89.4

133.0

170.2

Depreciation

30.9

39.7

49.0

51.2

54.3

Change in Working Capital

42.9

(23.3)

(67.7)

(28.4)

(74.9)

Interest / Dividend (Net)

Direct taxes paid

(10.5)

(9.0)

(27.1)

(41.2)

(52.8)

Others

(56.2)

(52.7)

(38.8)

4.3

27.0

Cash Flow from Operations

152.2

98.5

82.4

110.4

69.8

(Inc.)/ Dec. in Fixed Assets

(101.2)

(82.0)

(162.2)

(50.0)

(Inc.)/ Dec. in Investments

1.4

0.8

Cash Flow from Investing

(83.9)

(89.7)

(162.2)

(50.0)

Issue of Equity

50.0

505.3

Inc./(Dec.) in loans

150.6

46.4

(239.4)

(5.5)

Others

218.5

97.6

63.6

32.9

Cash Flow from Financing

(67.9)

(1.2)

202.3

(38.4)

(32.9)

Inc./(Dec.) in Cash

0.4

7.6

122.5

22.0

(13.1)

Opening Cash balances

2.0

2.4

10.0

132.5

154.5

Closing Cash balances

2.4

10.0

132.5

154.5

141.3

March 25, 2019

Amber Enterprises |Event Update

Key Ratios - Consolidated

Y/E March

FY16

FY17

FY18

FY19E

FY20E

Valuation Ratio (x)

P/E (on FDEPS)

101.2

96.9

39.2

27.1

21.3

P/CEPS

22.9

20.5

10.0

7.3

5.9

P/BV

9.3

7.3

2.7

2.5

2.3

Dividend yield (%)

EV/Sales

2.5

1.6

1.1

0.8

0.7

EV/EBITDA

23.9

20.8

12.8

11.6

9.6

EV / Total Assets

4.1

3.7

2.2

2.0

1.8

Per Share Data (`)

EPS (Basic)

7.7

8.0

19.8

28.6

36.4

EPS (fully diluted)

7.7

8.0

19.8

28.6

36.4

Cash EPS

33.9

37.9

77.9

106.3

131.7

Book Value

83.5

106.5

283.9

308.0

338.7

Returns (%)

ROCE

14.1

13.3

13.5

15.4

Angel ROIC (Pre-tax)

13.7

13.9

15.9

16.6

19.1

ROE

9.2

7.5

7.0

9.3

10.7

Turnover ratios (x)

Asset Turnover (Gross Block)

2.3

2.9

3.8

4.5

4.7

Inventory / Sales (days)

Receivables (days)

Payables (days)

Working capital cycle (ex-cash) (days)

Source: Company, Angel Research

March 25, 2019

Amber Enterprises |Event Update

Research Team Tel: 022 - 39357800

E-mail: [email protected]

Website: www.angelbroking.com

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Disclosure of Interest Statement

Amber Enterprises

1. Financial interest of research analyst or Angel or his Associate or his relative

2. Ownership of 1% or more of the stock by research analyst or Angel or associates or

relatives

3. Served as an officer, director or employee of the company covered under Research

4. Broking relationship with company covered under Research

Ratings (Based on Expected Returns:

Buy (> 15%)

Accumulate (5% to 15%)

Neutral (-5 to 5%)

over 12 months investment period)

Reduce (-5% to -15%)

Sell (< -15%)

March 25, 2019