Amber may gain big from govt's AC refrigerants import ban

Mumbai: Amber Enterprises, a contract manufacturer of air conditioners, is expected to be a key beneficiary of the government’s move to ban imports of ‘air conditioners with refrigerants’. The ban will increase opportunities for contract makers as most of the multinational companies are likely to import outdoor units without refrigerant and get the refrigerant filled locally.

Room air-conditioner (RAC) players like Voltas, Blue Star and Havells are expected to have minimal benefits as they already have a local manufacturing base with minimal dependence on imported completely built units, said analysts.

“The move has potential benefits for local ODM (original design manufacturer) companies like Amber Enterprise as it increases the market size opportunities for it,” said Ronald Siyoni, analyst, Sharekhan.

“Amber is currently trading at a PE ratio of 29 times its FY23 estimated earnings, which leaves room for further upside, considering its high earnings growth trajectory over FY21-23.”

Shares of Ambar gained 9% to Rs 2,168 on Friday. The stock has rallied 95% in the last six months and 140% in the last one year.

Amber is set to establish two new facilities of 0.7-1 million units each at an aggregate capex of Rs 275-300 crore. Analysts expect scope of further market share rise in the overall Indian RAC market.

“The ban is likely to benefit contract manufacturers like Amber Enterprises and Indian companies which have expanded manufacturing bases in India,” said Arafat Saiyed, AVP – research, Reliance Securities.

Amber has emerged as a market leader in the Indian RAC and ODM industry with over 70% market share and has 24% market share in the overall RAC market in FY20, with 8 out of 10 RAC brands as clients. Company has delivered good profit growth of 42% CAGR over the last 5 years with 26% sales CAGR over the same period.

India assembles 80% of domestic ACs, but overall value addition is quite low, at 40-45%. The value addition is set to increase with the import ban and Amber likely to gain, according to Nitin Bhasin, analyst, Ambit Capital.