Release Date: July 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Amber Enterprises India Ltd (NSE:AMBER, Financial) reported a strong revenue growth of 41% year-on-year for Q1 FY25.
- The company's EBITDA grew by 45%, and PAT recorded a growth of 60%, indicating robust financial performance.
- The consumer durable division saw a significant growth of 44%, driven by a 50% increase in the RAC business and a 39% increase in the non-RAC components vertical.
- The electronics division grew by 45% during the quarter, with EBITDA margins improving from 3% in 2018 to 7.7% in Q1 FY25.
- Amber Enterprises India Ltd (NSE:AMBER) has expanded its product portfolio and onboarded new customers, enhancing its market position and diversification efforts.
Negative Points
- The railway subsystem and defense division experienced a sluggish quarter due to delays in major projects like the Bangalore Metro and Mumbai Metro.
- The company expects the railway subsystem and defense division to be flattish this year, impacting overall growth projections.
- There is a high dependency on favorable weather conditions for the RAC business, which could pose a risk if weather patterns change.
- The average selling price of hearable and wearable products has decreased by 40%, affecting the top-line growth of the electronics division.
- The company's net debt stood at INR965 crores, which could be a concern if not managed effectively.
Q & A Highlights
Q: Sir, I have one question on the EMS institution. So last year we ended consumer durables per smart watches at about 91% share. How should we think about the share of the other verticals improving over the next two years to three years and what in your sense would be the right margin, say over the next three years for this vertical?
A: Dhruv, good morning. So you said 91%, we didn't get that point. But anyway, I'll give you a highlight on the electronics EMS division. Basically on this division, we have two segments now. We have PCBA and we have PCB. In our PCBA business, which started from 2018 by acquiring using a [adverse]. It was a small INR300 crore worth company when we were at 3% EBITDA. And we were catering to just refrigerators and air-conditioners, inverter PCB boards. So we took two years to develop our own boards, and we became the first company in India to develop our own inverter PCB solution. And then we found that we were having headwinds from Chinese. They were dropping the prices. Then we change our strategies. While strengthening our inverter PCB boards for air conditioning industry, we started diversifying into hearable, wearables, where the Smartwatches and Bluetooth speakers came in. And then we further added telecom equipments, telecom PCBAs, then we added smart meters, we have also added auto and recent. And recently we have added the defense portfolio. So in all, the trajectory was to take this 3% EBITDA from a bottom line towards a more than 6%, 7%, and we achieved about 5.6% last quarter while diversifying the applications. Then we acquired essential kits, which is into bare PCB boards and which is a more marginable business plus a very high import substitution opportunity. And on a blended basis, that division is also growing very well. It's grown by more than 30% this year over last year, and it has further strengthened because of the antidumping duty imposed by the government. On a blended basis, now the EBITDA has come to 7.7%. So in a nutshell, if you see, we have a strong R&D layer built up. Today, we are catering to almost about 22% to 23% of inverter PCB boards for air conditioners. The prime reason for which we acquired this company. So that objective has been achieved. And now we are further graduating into becoming an EMS player, electronic EMS player like our peers of very strong solution provider. So nobody has the solutions like we have. We have R&D layer on one side. We are giving a full solution on the PCB and different application plus we have a backward integration with the PCB support, which is a high-margin business. So all three put together brings this division to a very robust growth opportunity moving forward.
Q: Sir, how should we think about the contribution of non-consumer durables vertical evolving as a revenue share evolving over the next say over till by FY26 or FY27?
A: See, if you remember, we used to speak about when we were just entering into electronics that we want that our air conditioner versus other businesses, there should be a decent split of 50 50 moving forward. So we are moving towards that. And the vertical created by us, which is railways and defense and electronics are contributing to that only. Today, all these divisions, which have been -- where we have invested for that, they are non-seasonal in nature, they are having a good EBITDA margins. And overall basis, if you will see, we will be a very, very different diversified B2B player in moving forward in -- if we talk about three years or four years from now, which will be exporting our components, both in different divisions and also on the domestic side, there are huge growth opportunity.
Q: Sir, my first question is with respect to the room air-conditioning market. If you can give us a sense on what could it's likely to be the growth for the room AC business given the backdrop of the strong growth that was there in the summer for financial year '23. What kind of growth would have been there? What is the kind of volumes of room AC that the industry have seen on this year?
A: Well, you see, as per our resources, the H1, the full -- from the positive season is going from January onwards. We are seeing almost about 36% growth, 35% to 36% in the whole full number. So if we are talking of almost about one crore air conditioners last year, I think if this run rate continues in quarter four also, industry should be closing somewhere about INR1.3 crores to INR1.4 cores. And looking into that, I believe right now because of the good summers, inventory levels are at the minimum at this point of time, and everybody is anticipating good summers again. So everybody has started now preparing ourselves for the next season. And we believe that -- if you see actually Ravi, if you see the long term, I think this is -- we are seeing six bad seasons in last 24 years. We have seen many good season in this. But overall, because of the per capita income increase, because of the lifestyle, just because of our adequacy, this demand for air conditioners are moving. And what new trends we are seeing that it has started penetrating to Tier 3, Tier 4 cities and even to the rural areas. I was surprised to hear that even villages have started putting up the first air conditioners have started penetrating into some villages. So that means that it opens up a bigger opportunity moving forward for this sector.
Q: And sir, for us to grow, probably much higher than the industry growth rate. Say in terms of export opportunity or ability to manufacture critical components like compressors or even trying to gain further market share. If you can talk about them more in the room AC space, that will be great, sir.
A: So we are expanding both products -- product profile in the finished goods sector as well as in the component space. In the finished goods sector, as explained during my speech, we have expanded the product portfolio like Dollar air conditioners. We have become the first B2B company launching that our air conditioners, cassette air conditioners and window top through inverter series. And also the tropical high-efficiency splitter conditions. That is one part. There are endeavors moving forward for the exports also. And we expect we should be able to crack our first quarter of the for the export markets very soon. And that this is going on the product business. On the component side, we are already very deeply penetrated from the inverter PCB boards, from motors point of view. We can offer 70% of the bill of material in the air conditioners. Our wish list is that everybody should buy all the 70% from us. So that we should be 70% of the market. But, today we have about 26%, 27% market share, and we are maintaining that. But yeah, I
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
