Business at 85-90% of pre-COVID levels – Amber Enterprise

Update on Indian equity market:
Indian markets were slightly higher today with Nifty closing the day 57 points higher at 11,954. Within the index, the gainers were led by POWERGRID (4.2%), BHARTIARTL (3.5%) and TATASTEEL (3.1%) whereas BRITANNIA (-4.3%), TCS (-2.3%) and SBILIFE (-1.9%) were the laggards. Among the sectoral indices, REALTY (4.7%) METAL (2.4%) and BANK (1.6%) led the index higher whereas FMCG (-0.9%), MEDIA (-0.5%) and IT (-0.4%) led the laggards.
Excerpts of an interview with Mr. Jasbir Singh, Chairman & CEO, Amber Enterprise Ltd (Amber) published on CNBC-TV18 dated 19th October 2020:
The recent notification by the central government to ban the import of ACs with refrigerants would increase local manufacturing. 30% of ACs worth Rs 40,000 mn were imported in India in FY20. 75% of this had refrigerants. The company is eyeing the majority share from this opportunity.
The decision of the government will shift the complete manufacturing of all the imported goods to India and the company will benefit as they have the capacities in place.
India currently produces 7mn RACs (Refrigeration & Air Conditioning) whereas China produces 110 mn RACs.
The business is back on track and the industry is back to 85-90% of pre-COVID levels on a month on month basis.
The company has won some orders from Metro and Railways which are moving normally. The company expects some more orders in the recent future.
He said that pent demand during the months of lockdown resulted in increased manufacturing orders by OEMs (Original Equipment Manufacturers)
The company recently bought the remaining 20% stake in Sidwal Refrigeration Industries. Accordingly, Sidwal is now a wholly-owned subsidiary of Amber. The company expects a 15% growth from Sidwal acquisition in FY21E.
Consensus Estimate: (Source: market screener website)
The closing price of Amber was ₹ 2,307/- as of 21-Oct-2020. It traded at 96x/ 35x/ 26x the consensus EPS estimate of ₹ 24/ 66/ 90 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 2,050/- implies a P/E multiple of 23x on FY23E EPS of ₹ 90.
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