Amber Enterprises India Ltd Research ReportQ4

Amber Enterprises’ Q4FY20 revenue growth at 10% was largely driven by component and mobile business, which were up ~24% YoY in Q4FY20 led by low base and consolidation of Sidwal business. However, the core business i.e. ‘RAC’ segment (contributes ~60% in topline) recorded muted growth of ~3% YoY in Q4FY20 led by lower volume offtake by key customers in the wake of lockdown imposed from the last week of March 2020. According to estimate given by management, the company lost sales worth | 160-180 crore due lockdown in March. On the margin front, gross margin improvement of ~60 bps YoY was supported by improved product mix of subsidiaries and launch of various new models during FY20. However EBITDA margin in Q4FY20 (down 170 bps YoY) was largely hit by one-time forex loss (of | 16 crore) and higher employee cost. If the current trend of secondary sales continues (sharp rise in demand of RACs in the last 10 days of May 2020), the management expects possible inventory liquidation at dealer level by June 2020. However we believe a demand recovery would largely start from Q4FY20 supported by volume offtake by key clients. On profitability front, improvement in EBITDA margin of subsidiaries (~40% of sales) is encouraging. This, coupled with sales volume recovery from FY22E onwards would help drive EBITDA margins, going forward. We introduce FY22E estimates with revenue, EBITDA growth of ~41%, ~77% YoY and roll over our valuation on FY22E