Motilal Oswal Financial Services

Content:

PLI and Components: Crafting precision in every circuit

Page #4

Summary: PLI and Components:

Crafting precision in every circuit

Page #5

Page #12

Companies Covered

Story in charts

DIXON TECHNOLOGIES

Summary

..............................................................................................................................

Pg14

Story

charts

......................................................................................................................

Pg17

DIXON: Pioneering the future of manufacturing and electronics

......................................

Pg20



Best positioned to benefit from industry



Key beneficiary of PLI schemes



Key high growth segments



Dixon has scale advantage across segments



Efficient capital allocation is the key priority



Exports



Backward integration



Dixon is scaling up R&D presence across segments

Financial Outlook

.................................................................................................................

Pg37

Valuation and recommendation.......................................................................................... Pg39

Key risks: Demand slowdown and loss in key client relationships

....................................

Pg40

SWOT analysis

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Pg41

Management Team

..............................................................................................................

Pg42

Financials and valuations (Consolidated)

............................................................................

Pg44

AMBER ENTERPRISES

Summary

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Pg30

Story in charts

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Pg36

Amber 1.0 – RAC industry: Potential J-curve

......................................................................

Pg37

Amber 2.0 – Focusing on the high-growth electronics business

........................................

Pg39

Amber 3.0 – Anticipating growth from the Railways and Mobility businesses

.................

Pg44

Financial outlook

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Pg69

Valuation and recommendation.......................................................................................... Pg72

Company profile

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Pg73

Key risks: Slowdown in the industry, input price volatility

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Pg76

SWOT analysis

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Pg77

Management Team

..............................................................................................................

Pg78

Financials and valuations (Consolidated)

............................................................................

Pg79

EMS Thematic - PLI and Components: Crafting precision in

EMS: Thematic

every circuit

EMS

PLI and Components: Crafting precision in every circuit

PLI and component manufacturing

India has successfully established a manufacturing presence in sectors like mobile phones

and consumer electronics, and the next objective is to boost value addition. The

government has already initiated various measures, such as the Production Linked

Incentive (PLI) schemes and the Semicon India program, to promote electronic

manufacturing in India. Additionally, the government has reopened the window for the PLI

Scheme for White Goods to attract more investments. To further enhance localization and

value addition in India, additional initiatives will be necessary to stimulate component

manufacturing, an area where the government is already engaged in developing various

schemes. Significant announcements are already being made in larger components such as

semiconductor chips, display screens, battery chargers, and mechanical parts. This trend

offers substantial growth opportunities for companies focusing on PLI and electronic

manufacturing. We initiate coverage on Dixon Technologies (BUY) and Amber Enterprises

(BUY) as these companies have already achieved market leadership in their key domains

and are now concentrating on expanding their presence across different segments and

backward integration.

Electronic industry is benefitting from government measures

The government has implemented several initiatives such as PLI, PMP, SPECS, EMC,

and Semicon India to boost investments in the electronics and EMS industries. With

these measures, electronics production moved up from $48b in FY17 to $101b in

FY23. India’s electronic manufacturing capacity is projected to reach $500b (finished

goods $350b and components $150b) by FY2030 which would imply significant

investments in enhancing the component ecosystem too. Currently, country has

significant presence and capabilities of assemblers and OEMs in the electronics

value chain such as Foxconn, Dixon, Amber, Pegatron, Apple, Samsung, BoAt,

Atomberg, particularly in mobile and consumer electronics segments but is heavily

reliant on imports for components and design capabilities across all sectors. A

progress on component manufacturing is being initiated by few companies which

will evolve more in the coming years.

Initiatives needed from government for developing entire eco-system

Component manufacturing has not shown the same growth as it requires an upfront

initial capex and has lower asset turnover ratios with a gestation period of 1-2 years

Valuation metrics

from investment to production. Hence, industry is seeking more initiatives from

Mcap TP Upside

government to boost component manufacturing in India. Niti Ayog has

Cos.

(INR b) INR

(%)

recommended several measures to boost component manufacturing and India’s

positioning in the global electronics manufacturing and country’s integration into

Dixon

8.8 15,000 21.0

Global Value Chains (GVC). These include 1) fiscal incentives for component

Amber

1.7 5,000 21.0

manufacturing, 2) Incentives for investing in R&D, 3) tariff simplification, 4) soft

Kaynes Tech

3.5 5000 -1.5

infrastructure initiatives, 5) Tech transfer enablement and 6) setting up of industrial

Syrma SGS Tech. 0.9 540 31.1

infra zones.

Cyient DLM

0.7

0.4

880

560

12.1

14.5

Avalon Tech

Electronic manufacturing is poised for a long-term growth

Backed by these measures, the domestic EMS industry is likely to grow to INR6.0t in

FY27 from INR1.46t in FY22. This is expected to benefit the companies operating in

this segment, such as Dixon Technologies, Amber Enterprises, et al. We believe that

these companies have already attained a significant scale and market leadership and

August 2024

EMS Thematic - PLI and Components: Crafting precision in every circuit

are now poised for backward integration through component manufacturing. To

further boost localization and value addition in India, additional initiatives will be

necessary to promote component manufacturing in the country, where the

government is already working on various schemes.

DIXON TECHNOLOGIES

Financials Snapshot (INR b)

Y/E March

FY25E FY26E

Sales

333.8 434.8

EBITDA

13.1 17.5

EBITDA Margin (%)

3.9

4.0

PAT

6.6

9.7

EPS (INR)

111.2 162.8

EPS Growth (%)

80.8 46.4

BV/Share (INR)

391.6 551.4

Ratios

Net D/E

-0.3 -0.5

RoE (%)

32.9 34.5

RoCE (%)

37.7 38.3

Payout (%)

2.7

1.8

Valuations

P/E (x)

111.2 75.9

P/BV (x)

31.6 22.4

EV/EBITDA (x)

55.8 41.3

Div Yield (%)

0.0

FY27E

525.3

21.7

4.1

12.8

213.8

31.3

762.2

-0.6

32.5

35.8

1.4

57.8

16.2

32.8

0.0

Dixon Technologies: Pioneering the future of manufacturing and electronics

Dixon Technologies (DIXON) has emerged as a fast-growing diversified player in the

electronics manufacturing services (EMS) industry. DIXON is a key beneficiary of

several production-linked incentive (PLI) schemes for mobile phones, IT hardware,

white goods, lighting, and AC components. It has consistently increased its market

share in different segments through new technology tie-ups or new client additions.

Its recent partnerships with: 1) HKC Corp for manufacturing of displays for mobile

phones, TVs, and automotive, and 2) Longcheer Group for mobile phones, along

with stake purchase of Ismartu, and sub-licensing arrangement with Google for TVs

last year will help the company maintain its market leadership position. We expect

DIXON to continue focusing on new segments, backward integration, ODM mix

improvement, and operational efficiencies to boost its margins despite the rising

revenue contribution from the low-margin mobile segment.

Dixon Technologies: Financial outlook and view

We estimate a revenue/PAT CAGR of 44%/51% during FY24-27. We believe that an

efficient working capital cycle, a focus on capital allocation, and higher asset

turnover ratios should result in an RoE/ RoCE of 33%/36% by FY27E. We initiate

coverage on the stock with a BUY rating and a DCF-based TP of INR15,000. Though

valuations are on the higher side, strong industry growth drivers, presence in the

fast-growing segments, possibility of adding more segments, and best-in-class RoIC

will keep valuations higher.

Amber Enterprises: Moving beyond cyclicality

Amber Enterprises (Amber) is a leading player in ODM/OEM solutions for the Indian

RAC industry. The company is one of the beneficiaries of PLI scheme with an early-

mover advantage in PLI-led capex for RAC and AC components. With strategic

diversification towards the high-growth electronics market (especially PCB

manufacturing) and an increasing scope of work in the mobility segment, we expect

Amber to benefit from margin improvement. We expect the company’s transition

from Amber 1.0 (AC-focused) to Amber 2.0 (electronics) and Amber 3.0 (mobility) to

AMBER ENTERPRISES

reduce business cyclicality and result in improved asset turnover and return ratios

Financials Snapshot (INR b)

Y/E MARCH

FY25E FY26E FY27E

after the initial few years of capex.

Sales

84.6 102.2 119.4

EBITDA

6.3

8.4

9.9

EBITDA Margin (%)

7.4

8.2

8.3

PAT

2.3

3.5

4.6

EPS (INR)

68.1 105.1 135.7

EPS Growth (%)

69.6 54.3 29.1

BV/Share (INR)

680.8 785.8 921.5

Ratios

Net D/E

0.4

0.3

0.1

RoE (%)

10.5 14.3 15.9

RoCE (%)

9.8 12.1 13.4

Valuations

P/E (x)

60.7 39.3 30.4

P/BV (x)

6.1

5.3

4.5

EV/EBITDA (x)

24.0 17.8 14.7

Amber Enterprises: Financial outlook and view

We estimate a revenue/EBITDA/PAT CAGR of 21%/26%/50% over FY24-27, which is

likely to be driven by mid-teens CAGR in the consumer durable segment, high

growth in the electronics and mobility segments, and a 100bp margin improvement

over FY24-27. We initiate coverage on Amber with a BUY rating and a DCF-based TP

of INR5,000, implying 42x P/E on two-year forward EPS (Sep’26E).

Key risks and concerns

The sector is poised for high growth in the coming years. Key risks to this growth

could arise from slower-than-expected growth in electronic manufacturing, a

slowdown in user industries such as consumer durables, mobile phones, and air

conditioners, supply chain issues affecting the import of raw materials, changes in

the government's priorities for the PLI scheme or semiconductor manufacturing,

and a global slowdown that could detrimentally impact exports.

August 2024

EMS Thematic - PLI and Components: Crafting precision in every circuit

STORY IN CHARTS

Depth of India’s presence across value chain and future initiatives needed

Depth of India’s presence in electronics across value chain

HIGH

FINAL ASSEMBLY/

SEGMENT

PRODUCTS

SUB-ASSEMBLY

MEDIUM

COMPONENT MFG

LOW

DESIGN

Mobile

Smartphones

Consumer

Electronics

Air conditioners

Refrigerator

Laptop

IT hardware

Server

4G/5G RAN; Baseband

unit (incl CU, DU),

Antenna/RRU, xPON

FTTH, Others

Production of

Assembly for mobile has

mechanical and

taken off; ~2b

composites (casing,

cumulative shipments

cable and box content

between 2014-22

etc)

Sub-assembly: Battery

Minimal to no presence

pack, Charger largely

E.g. Tata Electronics for

localized; Camera

iPhone casing (10-15%

module, display

BoM)

assembly ~25%

localization

Design capabilities are

Multiple EMS (e.g.

Open cells (~60% BoM)

with only few players

Dixon/Amber)/ OEMs

are primarily imported

like Dixon

(e.g. Samsung) do

finished product

Home-grown OEMs such

assembly/sub-assembly

Through-hole

as Blue Star, Godrej

- Display is the largest components, electro-

Appliances have

component, sub-

mechanical components established some design

assembled in

are manufactured

and engineering

India for TV

capabilities

>80% of laptops

Minimal presence

Primarily import

consumed domestically

(VVDN Technologies,

dependent

are imported

CDAC)

>40% of total imports

are from China

Primarily import

dependent

Ongoing design efforts

by a consortium led by

TCS

Telecom

Automotive

~65% import

Powertrain Body and

dependent, i.ie. Most

Convenience Connectivity

OEMs import sub-

assemblies

Leading home-grown

OEMs such as Tata

Low tech components

Motors, M&M have

such as wire harness

established product

and connectors are

design and engineering

manufactured

capabilities, but have

(~10% BoM)

limited capabilities in

electronics

Primarily import

dependent

Minimal to no presence

Hearables &

Wearables

Smart watch, headphone,

Largely Box-assembly

wristband, glasses, ring,

(No PCBA today). E.g.

etc

Dixon for boAt

Source: ICEA, Company, MOFSL

August 2024

EMS Thematic - PLI and Components: Crafting precision in every circuit

STORY IN CHARTS

Current landscape of component manufacturing in mobile in India

KEY COMPONENTS CURRENT LANDSCAPE

OUTLOOK



Indian players can

manufacture up to 4-



Import dependence to continue, will require

layer PCBs,

however, most phones require

PCB

tech transfer in high-quality PCBs (multi-

8+ layer PCBs for which dependent on

layer, HDI, flex PCBs)

imports



Samsung sub-assembling mobile displays in



Foreign players (e.g. Samsung, CSOT)

Display (glass,

India; Vedanta - Twin Star - Innolux (TO) to

started manufacturing

LCD displays;

touch controller,

start manufacturing displays; Optiemus &

premium smartphones use

hi-tech

display)

Corning partnership for glass manufacturing;

OLED/AMOLED

Dixon setting up capex by tying up with HKC



Global players TSMC, MediaTek lead the



100% imported as

no fabs/

market;

4 projects approved

(Tata

Processor memory

Electronics - PSMC, Tata Electronics for

ATMP

in India today

ATMP, Micron and Renesas)



SMT-grade passives for Smartphones are



As local assembly achieves scale, companies

Passives

largely imported, small presnece of global

could be expected to

backward integrate

players (e.g. TDK, Wurth)

and manufacture these



Apple-Sunny Opotech, Syska-Biometric-Suyin



Camera assembly

with few players

partnerships, Holitech, Qtech engaged in

operating at

limited scale:

high

camera module assembly in India; OEM-

Camera module

dependence on

imports for components

ODM-EMS partnerships to drive

(lens, sensor, etc)

manufacturing of components in coming

years



CATL in talks to expand in India; Excide



Battery cells

are mostly

imported

from

entered in agreement with SVOLT energy;

Battery module

China/Korea; some domestic players

Cells expected to be produced in India in 3-5

engaged in battery assembly

years.



High localization

(>80%) in

Charger, USB

Mechanical

Cable, Gift box Medium localization



Salcomp (charger) & Luxshare (cables)

composites &

(~20%) in

Die Cut Parts, Mechanics ~100%

expand in India; Jabil & Tata Electronics to

others

imports for Vibration Motor, Mic and

manufacture casing

Receiver

Source: NITI Aayog, ICEA, Company, MOFSL

August 2024

EMS Thematic - PLI and Components: Crafting precision in every circuit

STORY IN CHARTS

Niti Ayog has recommended various fiscal and non-fiscal interventions to increase component manufacturing and

share of electronics manufacturing in India by 2030

Fiscal incentives for components

manufacturing



Opex support for scaling

manufacturing of low

complexity/locally produced

components (non-SMT grade, casing,

glass, etc)



Capex support for high-complexity

components (Mechanics, capital

goods, special components (SMD

grade), Lithium-ion cells)



Hybrid support for high-complexity

components (SMD grade, 8 layer+

PCB, passives, etc)

Tariffs simplification and rationalization

of taxes



Rationalize tariffs/duties on inputs to

improve competitiveness of Finished

Goods for exports



GST and income tax rationalization

Product/System Design Ecosystem



Innovation scheme: To promote

SMEs/R&D centres of Indian firms to

invest in product design and R&D



Scale up scheme: incentive to

promote scale for electronics

'designed in India'

Soft infrastructure/Skilling



Attract overseas high-level talent for

high precision manufacturing and

design with top position and

attractive pays



Expedited visa approvals for training



Foster collaboration between

academia & industry for advanced

manufacturing and high tech skills



Supporting industries for skilling and

setting up Electronics skills training

hubs

Scale up Industrial Infra



Develop large-size scaled clusters



Provision for localized regulations

(e.g. labor laws) and cluster

governance



Each cluster to provision essential

common facilities - waste treatment

plans, industry grade utilities and

connectivity (around airports)



Improve the overall attractiveness of

clusters through duty free imports

(Free Trade Zones)



Worker's housing facilities

Tech Transfer and Business enablement



Simplify the process of Tech Transfer

and fast-track approvals (PN3)

required for components

manufacturing



Rationalize permits for on-ground

operations required across all levels

of government



Lowering compliance costs and

streamlining regulations

Source: NitiAyog, MOFSL

August 2024

EMS Thematic - PLI and Components: Crafting precision in every circuit

STORY IN CHARTS

Government initiatives over last few years for electronic manufacturing

Domestic EMS market is expected to grow at a fast 32%

CAGR over FY22-27

India EMS market (INR b)

45.3

32.9 33.7

23.5 26.1 22.4

10.2

25.3 25.7

3.6

4.4 4.1

5.5

3.4

4.1

37.3

33.2

7.3

6.6

7.2

Growth YoY

Within this market, we expect Dixon to improve its market

share with high growth in mobile, IT hardware

India EMS market (INR b)

Dixon market share (%)

10.4

10.2

9.2

Source: F&S, MOFSL

Total PLI investment target for mobile, laptop, PCs, etc. set by the govt. from companies -

(INR m)

PLI Scheme

Large-scale electronics

manufacturing

IT Hardware 2.0

Total

Total Incremental

expected

investment

Base

incentive

required by

Year

outlay

applicant

INR410b

INR169b

INR10b

INR2.5b

FY20

FY23

Incremental Investment over base year required by applicant

Year 1

2,500

250

Year 2

2,500

500

Year 3

2,500

500

Year 4

2,500

500

Year 5

500

Year 6

250

PLI For Mobile - expected total incentive is INR410b for all companies

Segment

Proposed

Incentive rate

Year 1: 6%

Mobile Phones

(Invoice value of

INR15,000 and above)

Year 2: 6%

Year 3: 5%

Year 4: 5%

Year 5: 4%

Incremental Investment

over base year

Cumulative INR10b

over 4 years

Year 1: 2.5

Year 2: 5.0

Year 3: 7.5

Year 4: 10.0

Incremental sales of

manufactured goods

over base year

Year 1: INR40b

Year 2: INR80b

Year 3: INR150b

Year 4: INR200b

Year 5: INR250b

IT hardware PLI 2.0 - expected total incentive is INR170b for all companies

Category

Incremental Investment

over base year

Cumulative INR2.5b over 6 years

Year 1: INR 0.25b

Year 2: INR 0.75b

Year 3: INR 1.25b

Year 4: INR 1.75b

Year 5: INR 2.25b

Year 6: INR 2.50b

Incremental sales of manufactured

goods over base year

Year 1: INR5b

Year 2: INR12.5b

Year 3: INR25b

Year 4: INR50b

Year 5: INR60b

Year 6: INR75b

Source: MEITY, MOFSL

Hybrid (Global/Domestic) companies

1) Laptops (Invoice value of INR 30,000 and above)

2) Tablets (Invoice value of INR 15,000 and above)

3) All-in-One PCs

4) Servers

5) Ultra Small Form Factor (USFF)

List of approved companies for IT hardware 2.0 PLI scheme:

1) Dell International Services India Private Limited; 2) Rising Stars Hi-Tech Private

Limited; 3) HP India Sales Private Limited; 4) Flextronics Technologies (India) Pvt Ltd;

Padget Electronics Pvt Ltd (DIXON’s subsidiary);

6) Sojo Manufacturing Services

AP PVT Ltd; 7) VVDN Technologies Private Limited; 8) Goodworth Electronics Private

Limited; 9) Neolync Tele Communications Private Limited; 10) Syrma SGS

Technology Ltd. 11) Bhagwati Products Ltd; 12) Netweb Technologies India Limited;

13) Genus electrotech Limited; 14) Sahasra Electronic Solutions Limited; 15)

Hangshine Technosoft Private Limited; 16) Riot Labz Private Limited; 17) Smile

Electronics Ltd; 18) Mega Networks Private Limited; 19) Plumage Solutions Private

Limited; 20) HLBS Tech Pvt Ltd; 21) Panache Digilife Limited; 22) RDP Workstations

Private Limited; 23) Kaynes Electronics Manufacturing Pvt Ltd; 24) INP Technologies

Pvt Ltd; 25) Optiemus Telecommunication Private Limited; 26) ITI Limited; 27)

Sancraft Industries Pvt Ltd

PLI for Lighting and AC components will increase backward integration for

DIXON



In the PLI scheme for white goods for the manufacturing of components and

sub-assemblies of ACs and LED lights, 48 beneficiaries were selected, including

32 for AC manufacturing and 16 for LED lights manufacturing, with committed

investments of INR48b and INR7.2b, respectively. With PLI approval for

investment worth INR1b over the next five years in LED drivers, LED engines,

LED modules, light management system, mechanics and inductors, the company

has commenced investment and expects to increase backward integration.

DIXON has also secured approval for AC components and established a JV with

Rexxam for inverter controller boards, with a total investment of INR510m over

five years, benefiting from PLI.

Future growth strategy beyond PLI

For growth beyond the PLI scheme tenure, DIXON is building a base for sustaining a

higher growth trajectory. This will be achieved by (1) foraying into design

manufacturing and increasing the share of ODM, (2) building R&D base for

collaborative technology into newer areas, (3) focus on training, skill and

August 2024

Dixon Technologies

automation as it has already tied up with Siemens for automation of systems, (4)

strengthening manufacturing by increased backward integration as it is already

setting up a component facility for various segments under PLI along with displays

for mobile, (5) building a scale in emerging segments, (6) focus on entering into

areas which have higher asset turnover ratios, (7) extreme focus on capital

allocation and management of current assets to maintain higher RoCE.

3. Key high-growth segments

DIXON’s Mobile & EMS and emerging business divisions

will remain high-growth

segments going forward and its

Consumer Electronics

division will witness margin

improvement. In each segment in last few years, the management has entered into

various strategic partnerships, increased wallet share with existing clients and added

new clients in all business. We expect the mobile segment to benefit from new

client additions and the company’s efficient capital allocation; consumer electronics

to benefit from backward integration and improved ODM mix; and emerging

segments to grow from improved volumes and operational efficiencies.

Mobile and EMS

Growth recovering in Indian smartphone market

Growth in the Indian smartphone market has started recovering in 1QCY24 after

remaining largely flat in FY22 and FY23. The smartphone market has seen changes,

particularly after Covid years, in customer preferences toward premium products.

With several government initiatives (i.e., PLI), the export of mobile phones from

India has increased significantly, mainly led by Apple and Samsung, and domestic

EMS companies have also seen a shift in customer’s priorities.

Exhibit 8: India smartphone market share (CY ending quarters) (%)

Xiaomi

4Q18

4Q19

4Q20

Vivo

4Q21

Samsung

4Q22

Realme

1Q23

Oppo

Others

3Q23

4Q23

2Q23

1Q24

Source: Counterpoint, MOFSL

Exhibit 9:

Number of smartphone users in India on a rise

Smartphone users in India (m)

66.2

938

70.9

1014

Penetration (%)

75.0

78.4

81.3

Exhibit 10:

Mobile phone exports from India

Mobile phone export (m units)

% of Total Mobile phone market

16.1

9.6

5.6

FY20

FY21

FY22

46.4

35.4

642

485

54.2

757

60.6

853

1193

1081

1140

13.6

15.7

17.2

18.7

19.4

2018 2019 2020 2021 2022 2023 2024 2025 2026

Source: Statista, MOFSL

FY19

FY23E FY24E FY25E FY26E

Source: Bharat FIH, MOFSL

August 2024

Dixon Technologies

Exhibit 11:

Domestic production outpaced domestic demand

post Covid

Domestic production (USD b)

Domestic demand (USD b)

Exhibit 12:

Exports as % of domestic mobile phone

production on a rise

Domestic mobile phone production (USD b)

Exports as % of mobile phone production

12.7

2.8

1.3

6.2

1.1

10.3

15.3

25.2

8.0

2016

13.0

2017

20.0

2018

26.0

2019

30.0

2020

30.0

2021

38.0

2022

44.0

2023

2015 2016 2017 2018 2019 2020 2021 2022 2023

Source: Statista, MOFSL

Source: Bharat FIH, MOFSL

Share of mobile segment revenue to grow sharply for DIXON

Over the last one year, DIXON’s mobile segment has seen additions of various

customers such as Xiaomi, Jio, Compal, acquisition of Ismartu and arrangement with

Longcheer, which will boost its mobile segment revenue from FY25. It now has a

diversified list of clients in the mobile segment, including Xiaomi, Samsung,

Motorola, Nokia, Itel, Jio, and Karbonn. The company’s acquisition of Ismartu will

add brands such as Itel, Tecno and Infinix to its portfolio. Its recent partnership with

Longcheer will help DIXON expand scope of work toward other entities (Oppo, Vivo,

One Plus, Realme and iQOO). With these, DIXON would be able to cater to all major

clients in the Indian mobile phone market as Xiaomi, Vivo, Samsung, Realme and

Oppo together held a market share of 68% of overall shipments from India in 2023.

DIXON has also been able to achieve PLI-led capex and revenue threshold limits on

timely execution. Currently, the company has an order book of 28m mobiles,

comprising volumes from Motorola, Xiaomi, Oppo (Realme), Ismartu and potential

new brands.

While we expect feature phone revenues for DIXON to remain stable, smartphone

revenues will see a sharp jump. We factor in improved volumes from Motorola,

higher wallet share from Xiaomi and commencement of volumes from Realme,

Compal, Itel, and potential new brands. We expect mobile segment revenues to

grow from INR92b in FY24 to INR233b/INR296b in FY25/FY26.

Exhibit 13: Market share of major brands in Indian smart phone market indicates that

DIXON caters to all major customers in India Smartphone market (Market share in 2023 %)

Tecno Others

Infinix

Oneplus

Apple

Oppo

10%

Poco

Samsung

17%

Vivo

15%

Xiaomi

12%

Realme

14%

Source: IDC, MOFSL

August 2024

Dixon Technologies

Ismartu acquisition to add incremental revenues in smart and feature phones



Ismartu India is the manufacturing arm of Transsion Holdings, a global leader in

mobile phone manufacturing. Transsion Holdings ranks among the top-five

smartphone makers worldwide. Ismartu India has established itself as a key

player in India’s electronics manufacturing sector, having a turnover of around

INR62b in FY23. It operates under brand names of Itel, Infinix and Tecno, and

has three manufacturing facilities in Noida. It is among the market leaders in

feature phone categories in India. DIXON will pay INR2.4b in the first tranche for

a 50.1% stake and has an option to increase the stake by 1.6-5.9% in the second

tranche in FY27 for an aggregate consideration at a valuation of 20 times of

profit after tax of Ismartu for FY26.



After the CCI approval, we expect Ismartu’s financials to be consolidated for

nine months during FY25.

Partnership with Longcheer can add more brands to DIXON’s portfolio



DIXON’s subsidiary, Padget Electronics, has entered into an agreement with

Longcheer Mobile India for undertaking manufacturing and sale of smartphones

for large global brands with Longcheer’s design and technology.



Longcheer has strong capabilities in product-level solution design, hardware

innovation design, system-level software platform development, lean

production, supply chain integration and quality control capabilities. The

company offers integrated smart product services to leading global consumer

electronics brands across multiple countries and regions. It has approximately

28% share of ODM at a worldwide level. Its key clients include Xiaomi, Samsung,

Huawei, Lenovo, Honor, Oppo, Vivo and China Telecom.



This tie-up is already helping DIXON bag a contract from Realme and the

company is already scaling up production of Realme smartphones to 450k per

month. We expect this tie-up to open up further opportunities for DIXON to

target a larger wallet share from existing clients as well as tap new clients such

as Oppo, Vivo, Oneplus and Realme.



With this, DIXON’s addressable market opens up across wider brands of

Longcheer, which together form nearly 44-45% of the Indian smartphone

market.

Exhibit 14: Market share trend of major brands in Indian smart phone market (%)

Brands

Samsung

Vivo

Realme

Xiaomi

Oppo

Apple

Oneplus

POCO

Infinix

Tecno

Others

2022

18.1

14.1

14.5

17.8

11.9

4.6

4.1

3.2

2.3

2.4

7.0

2023

17.0

15.2

12.5

12.4

10.3

6.4

6.1

4.9

3.1

2.9

9.2

Source: IDC, MOFSL

August 2024

Dixon Technologies

Wallet share and market share to improve

DIXON's growth trajectory will be driven by new client acquisitions domestically,

despite overall market growth being largely flat. DIXON's mobile volumes from the

Motorola plant have shown improvement, with 15-20% of total volumes earmarked

for exports. With the addition of new clients in mobile such as Xiaomi, Ismartu,

Compal and Oppo, we expect its overall market share in mobile segment to move

up. We also foresee volume increases for Nokia and Itel across feature phones.

Efforts are underway to enhance capabilities across various components and

systems, display facility supported by the establishment of an R&D team and a lab of

70 engineers for 4G and 5G smartphone development. DIXON's immediate priority is

to scale up volumes through these new partnerships. We expect volume market

share to move up to 22% for smartphones by FY27 from 5% in FY24 and 29% for

feature phone by FY27E. Overall, we expect DIXON’s volume market share to move

up to 27% in mobile market by FY27E.

Expanding scope of work via backward Integration



Out of the entire bill of material for manufacturing a smartphone, nearly 50% of

the total cost is spent on semiconductor, display assembly and camera module,

which are currently imported. DIXON is building capabilities across PCBA,

mechanics and battery chargers. The company also plans to manufacture display

module (~10% of total cost of smartphone) and has already finalized a

technology partner with a planned capex of USD30m (excluding land and

building). It is also looking to foray into precision components and mechanicals.



For display modules, DIXON has entered into a term sheet with HKC Corp. to

form a Joint Venture for manufacturing of liquid crystal modules (LCM), thin film

transistor liquid crystal display modules (TFT-LCD modules), assembly of end

products like, smartphones, TVs, monitors and auto displays, and also selling

HKC branded end products in India. This venture will give a boost to the

company’s aim of setting up an electronic component ecosystem and deepening

value addition.

Exhibit 15: BoM of smartphone across various components (%)

Others, 16

Embedded taxes

and duties, 8

PCB and PCBA, 3

Actives and

passives, 6

Accessories, 7

Semiconductors

ATMP, 27

Mechanics,

die-cuts,

acoustics,

etc., 10

Display assembly,

Camera

module, 11

Source: Company, MOFSL

August 2024

Dixon Technologies

Exhibit 16: India vs China localization of sub-assemblies of mobile phone indicates vast

scope of indigenization which is required in key items of a mobile phone (%)

Description

PCBA

Display assembly

Camera module

Mechanics

Battery pack

Charger adapter

Connectors

Die cuts parts

Gift box

USB cable

Wired headset

Active

Passive

Memory and storage

India

100

China

100

Source: ICEA, MOFSL

Mobile segment demonstrates high return ratios due to increased asset utilization

In the mobile segment, DIXON fulfils orders through both job work and margin-

based contracts. While DIXON earns 3% margins on EMS basis for both 2G and 4G

phones, it undertakes certain contracts, where mobile volumes are not consolidated

and the company opts for per-unit realizations at lower rates than normal feature

phone, but achieves 30% margins. The company targets RoCE of 25-30% on both

types of contracts. The company has incurred PLI scheme-driven capex of INR2.3-

2.5b, potentially generating revenues of INR75-80b and achieving asset turns of

more than 30x. This strategy yields significantly higher RoCE despite the segment's

low margins.

Overall mobile segment outlook

DIXON has evolved its mobile business over the years as the segment contributed

62% to overall revenues in FY24 and reported a CAGR of 98% over FY19-24. The

company has a diversified list of clients including Motorola, Xiaomi, Samsung, Oppo,

Jio, Nokia, Itel and now the arrangement to acquire share in Ismartu and JV with

Longcheer will further open doors for increased EMS opportunities in mobile

segment for DIXON for both domestic and international markets. As per the

management, new customer additions are margin-accretive to the segment, and

blended realization per smartphone is ~INR8,000-9,000 per unit (net of GST).

We expect mobile segment revenues to grow to INR233b/INR296b/INR342b in

FY25/FY26/FY27.

August 2024

Dixon Technologies

IT hardware 2.0



In Oct’23, the government placed restrictions on specific IT hardware imports

with the latest revision in guidelines, according to which importers can import

hardware with only authorization specifying quantity and value. DGFT clarified

that certain IT hardware like desktop computers can be imported without

restrictions. However, laptops, tablets, all-in-one PCs, and ultra-small form

factor computers still require import authorization.

DIXON, through its subsidiary Padget Electronics, stands as a beneficiary under

the IT Hardware PLI 2.0 scheme, with a committed investment of INR2.5b.

Currently, DIXON has Acer as its anchor client in this business. Recently, the

company finalized business with Lenovo for the manufacturing of tablets; NPI

phase for tablets is completed and the company plans to start mass production

in Sept’24. Additionally, DIXON is in discussions with ASUS, which will increase

its share in tablets and notebooks. Revenues for this segment declined by 9% in

FY24 to INR1.4b. We expect revenues to grow sharply to INR5b/INR25b/INR50b

in FY25/26/27.

2023

Shipments

4,385

2,317

2,154

1,705

1,100

2,254

13,915

2023 market

31.5%

16.7%

15.5%

12.3%

7.9%

16.2%

100%

2022

Shipments

4,499

2,818

2,854

1,469

1,013

2,240

14,893

2022 market

30.2%

18.9%

19.2%

9.9%

6.8%

15.0%

100%

Source: IDC, MOFSL

Exhibit 17: Market share trend of key players in IT hardware in India (%)

Company

HP Inc.

Lenovo

Dell

Acer

Asus

Others

Total

Consumer Electronics

Industry overview and outlook



TV penetration in India is ~65%, the highest among consumer electronics.

However, growth in this industry over the last two years was impacted by a

decline in demand as well as a sharp correction in open cell prices. Going ahead,

the ODM industry in television is moving toward premiumization and value

addition, which will drive growth as well as margin improvement.

The share of smart TVs in total TV shipments in India reached 93% in 2023 from

67% in FY20. Within smart TVs, key players Samsung, Xiaomi, Oneplus, LG and

TCL form nearly 46% of total market.

Exhibit 19:

TV penetration in consumer durables (%)

65%

33%

Exhibit 18:

Smart TV market share in India (%)

2023

Xiaomi,

11.4

Samsung,

10.8

Others,

54.2

TCL, 6.8

37%

Oneplus,

7.1

LG, 9.7

12%

17%

Source: Company, MOFSL

August 2024

Source: Company, MOFSL

Dixon Technologies

DIXON’s position in the TV segment

DIXON with an annual capacity of 6.5m units takes care of nearly 30% of India’s

demand. Xiaomi, Samsung, Oneplus, LG and TCL are the major players in the smart

TV market with a combined market share of 46%. Xiaomi and Samsung lead the pack

with a market share of 11.4% and 10.8%, respectively, as of 2023. DIXON’s key

clients are Xiaomi, Samsung, Hisense, VU, Nokia, Panasonic, TCL and Lloyd. The

management plans to increase its wallet share with existing as well as other clients

by improving its product offerings. Additionally, DIXON secured ODM sub-licensing

rights with Google for Android and Google TV platforms in FY23, a significant

advancement as prevalence of these platforms is 60-65% in the Indian market.

These initiatives will improve margins in the consumer electronics division. Beyond

TV manufacturing, DIXON is also expanding its product range to include commercial

displays and interactive boards, automotive boards and industrial displays, which

are margin-accretive segments.

Exhibit 20: DIXON market share in TV segment among key ODM players (%)

FY22

Others, 24

Dixon, 37

Videotex, 4

Radiant, 24

Bhagwati, 11

Source: Company, MOFSL

As per the management, an outsourcing opportunity in TV is 50-55%, which is not

growing further. So, DIXON is focusing on backward integration with injection

moulding and mechanicals, and it has also started manufacturing LED boards, which

is margin accretive for DIXON. Partnership with Samsung for Tizen operating system

is expected to roll out in 1QFY25 and manufacturing of digital signage solutions has

commenced, alongside interactive flat display panels. A state-of-the-art R&D center

has been established in Noida to drive further developments in this segment.

Exhibit 21: DIXON manufacturing capacity and market share

trend over last few years

India TV market volumes (m units)

Dixon TV Mfg capacity (m units)

Market share (%)

27.2

26.8

Exhibit 22: ODM contribution in consumer electronics for

Dixon has been moving up (%)

ODM Revenue share (%)

34.0

23.0

26.5

24.3

23.2

6.0

14.0 3.4

15.5 3.6

16.4

4.4

20.2 5.5

22.6 6.0

9.0

6.0

5.0

4.0

FY19

FY20

FY21

FY22

FY23

FY18

FY19

FY20

FY21

FY22

FY23

FY24

Source: Company, MOFSL

August 2024

Dixon Technologies

Expanding scope of work via backward Integration

In the bill of materials for LED TVs, about 60% of the total cost is allocated to open

cell and panel components, which are presently imported. DIXON does not intend to

enter open cell and panel manufacturing soon. However, it aims to reduce costs in

other areas, such as injection moulding units and PCBA. To achieve this, the

company has brought the injection moulding process in-house, expanded SMT lines

for PCBs, and established an LED bar assembly line for TVs. Its ODM share in

consumer electronics was 34% in FY23 (6% in FY18).

Exhibit 23: BoM for LED TV across components (%)

Speaker,

PCB

and PCBA, 17

Others,

Open cell, 50

BLU,

Panel part,

Source: Company, MOFSL

AC PCB and components

AC PCB and components are also part of the consumer electronics division. DIXON

and Rexxam has formed a 40:60 joint venture to manufacture inverter controller

boards for AC. Rexxam, a design and technology partner for Daikin, brings expertise

in PCBA design. Currently, the market for these boards is dominated by imports or

Chinese players with a base in India. The JV achieved a revenue of INR2.6b in FY24

with healthy operating margins and ROCE. The management plans to increase

exports under this business by FY25.

Future growth & outlook

The consumer electronics segment’s revenues posted a CAGR of 28% during FY19-

FY24, contributing ~23% of total revenues in FY24. We expect consumer electronics

revenues/EBITDA to clock a CAGR of 7.5%/15% during FY24-FY27, led by strong

wallet share with existing clients, addition of new clients and increased ODM share.

Exhibit 24:

Consumer Electronics Revenues

Consumer Electronics (INR b)

83.4

75.5

34.5

11.2

-17.2

11.9

FY19

21.0

FY20

38.4

FY21

51.7

FY22

42.8

FY23

-3.0

5.6

8.5

2.1

Growth YoY

Exhibit 25:

Consumer Electronics EBITDA

Consumer Electronics (INR m)

3.4

EBITDA Margin (%)

4.2

4.0

3.7

2.4

2.7

3.1

2.4

41.5

43.8

47.5

51.6

252

FY19

503

FY20

1,028 1,246 1,306 1,410 1,620 1,900 2,165

FY21

FY22

FY23

FY24 FY25E FY26E FY27E

Source: Company, MOFSL

FY24 FY25E FY26E FY27E

Source: Company, MOFSL

August 2024

Dixon Technologies

Emerging Business



Telecom & networking products:

In this segment, DIXON opened a new

operational facility in Noida in Dec'22, which is now stable and scaling up

production for various telecom products. Notably, mass production is underway

for Telecom GPON-20, WiFi-5, and WiFi-6 routers, along with android set-top

boxes, with a focus on fulfilling orders from Airtel and other major mobile

service providers. The company has secured substantial orders from Airtel for

5G fixed wireless devices, currently in the NPI and trial phase, sourced from a

leading global ODM solution provider in the FWA category. Additionally, the

company has received large orders from India's largest telco for set-top boxes

and 5G CPE devices, slated for product launches in 4QFY24. Revenues for this

segment surged 120% in FY24 to INR6.8b. We expect a revenue CAGR of 40%

over FY24-27.

Wearables and hearables:

The company clocked strong volumes of TWS and has

a healthy order book. The majority of TWS production for BOAT is done by

DIXON. Further, it will be adding smartwatches to its portfolio in the next couple

of months. The company started doing SMT PCB in-house and plans to start

manufacturing of battery packs, which will further increase its backward

integration. Revenues for this segment jumped 149% in FY24 to INR7.5b and we

expect a 30% revenue CAGR over FY24-27.

Refrigerator:

DIXON created a capacity of 1.2m direct cool refrigerators (~10%

of domestic requirement) under various product categories of 190L-235L and

commercial production has commenced in 4QF24. Additionally, the company

has started developing two-door frost-free models and will introduce glass door

models too. We expect the segment to achieve revenues of INR5b/INR8.5b in

FY25/FY26, with EBITDAM in range of 7-7.5%.

4 DIXON has scale advantage across segments vs. competitors

DIXON has a scale advantage in most segments, which has resulted in leadership

position, and competition is still limited in most segments, with just two or three

large players, along with smaller players. DIXON has achieved economies of scale

across its key segments such, as consumer electronics and lighting, and expects to

replicate the same in the mobile segment. As a result, the company has a 50-70%

wallet share of clients in segments like lighting and LED TV and a strong base of

sticky customers. With PLI approvals already in place for other segments, the scale

benefits will start accruing in other segments too. This would make it easier for any

foreign OEM brand to choose DIXON as an EMS partner.

August 2024

Dixon Technologies

Exhibit 26:

Television market share by EMS companies in India (%, FY22)

FY22

Others, 24

Dixon, 37

Videotex, 4

Radiant, 24

Bhagwati, 11

Source: Company, MOFSL

Exhibit 27:

Washing machine market share of key players in FY22 (%)

Bosch

Market Share (%)

29%

Others

IFB

Haier

Godrej

11%

Whirlpool

17%

Samsung

18%

Source: Company, MOFSL

August 2024

Dixon Technologies

5. Efficient capital allocation key priority despite low-margin business

DIXON operates in the high-volume low-margin (HVLM) segment of the EMS

industry, which forms 89.5% of the domestic EMS market. Despite the low margin

nature of this segment, DIXON has maintained high RoCE. The company emphasizes

efficient capital allocation, resulting in a significant reduction in working capital in

recent years. Investments are guided by a payback period target of four years and a

targeted pre-tax RoCE of over 30%. This strategy has led to high RoCE and asset

turnover ratios in the consumer electronics and mobile division. Efficiency in capital

allocation is achieved by reducing the cost of capex, adopting a lease model for new

facilities, minimizing working capital, and adding segments with a higher asset

turnover. Consequently, even in segments with lower margins, the company

achieves healthy RoCE and high asset turnover ratios.

Exhibit 28: Mobile and consumer electronics enjoy high asset turnover ratios resulting in

high RoCE for these businesses

Mobile phone

(existing)

Capacity (m units)

Capex (INR m)

Capacity utilization (%)

Production (m units)

Realization (INR)

Revenue (INR m)

EBITDA (INR m)

EBITDA (%)

EBIT (INR m)

Post tax EBIT (INR m)

Working capital @ 5 days (INR m)

RoCE (%)

Asset turnover ratio (x)

8.4

2,000

6.0

10,500

62,622

1,879

3.0

1,745

1,309

858

45.8

31.3

Consumer

Electronics

1.0

300

0.6

11,000

6,600

198

3.0

178

134

34.2

22.0

Source: Company, MOFSL

Exhibit 29: Segmental RoCE has remained strong across divisions with much higher RoCE

for mobile and consumer electronics segment (%)

FY19

29 23

26 30 30

31 31

36 39

FY20

FY23

FY24

Consumer

Electronics

Lighting solutions Home Appliances Mobile Phone and

EMS

Security

Surveillance

Systems

Source: Company, MOFSL

August 2024

Dixon Technologies

Exhibit 30: India EMS market segmentation by HVLM vs. LVHM (%)

HVLM

10.6

11.2

10.5

10.0

9.9

10.5

LVMH

10.7

10.3

10.0

9.5

9.6

89.4

88.8

89.5

90.0

90.1

89.5

89.3

89.7

90.0

90.5

90.4

FY17

FY18

FY19

FY20

FY21

FY22

FY23E

FY24E

FY25E

FY26E

FY27E

Source: Company, MOFSL

6. Exports

An export opportunity is also gradually opening up for DIXON mainly for mobile,

Lighting, Washing machine and Telecom products. In Mobiles segment, DIXON

manufactures 100% of demand for Motorola’s India business and ~15% volumes of

what Motorola does globally. Management expects it share in total Motorola

business to reach 18-20%, leading to ~22% of total volume manufactured by DIXON

to be exported with almost 28-30% going to US market. Management expects

export volumes for Motorola to reach ~2m in FY25 from current levels of ~1.5m in

FY24. Additionally, recent tie-ups with Ismartu and Longcheer may also enhance

current level of export opportunity for Mobile business. In Lighting, company is

executing order for a new customer in UAE and working on a large RFQ for its own

anchor customer in for US markets. Additionally, it has expanded its export business

with new customer coming in from Germany and UK. In Washing machine segment,

DIXON will soon be starting exports for a large Japanese customer- “Sharp” for fully

automatic washing machine and further is in discussions with other brands for

exports.

7. Backward Integration

The majority of high-value components for mobile, TV, and washing machine

segments are currently imported, and transitioning the manufacturing of items like

open cell, panel, screen, display, semiconductor, and camera modules entirely to

India will require time. Nevertheless, DIXON is actively developing capabilities in

displays, PCB, mechanics, and battery chargers for mobiles to decrease reliance on

imports. Additionally, the company is collaborating with global brands to enhance

capabilities in TV and AC control boards, aiming to reduce dependence on imports in

these segments as well.

8. DIXON is scaling up R&D presence across segments

The company has three R&D centers for products spread across different segments.

It provides 100% ODM solutions in lighting and washing machine to its clients and

focuses on increasing ODM across different segments. DIXON expects to replicate

the journey in lighting and washing machine to other segments like consumer

electronics and mobile phones through increased R&D investments. In FY18, its

ODM share in lighting was 40% and it moved up to 90% now with margins at 7.5% in

FY24. Similarly, in consumer electronics, its ODM share has moved up from 6% in

FY18 to 23% now and the company plans to scale it up to 30% as client additions will

August 2024

Dixon Technologies

accelerate after the sub-licensing agreement with Google for ODM-based solutions

for android-based TVs. However, we believe that the company would be required to

invest more in R&D in the long term in order to build more capabilities across newer

technologies. Global players have been continuously investing in R&D.

Exhibit 31: ODM share in revenue across segments (%)

Consumer Electronics

100.0

87.0

71.0

6.0

40.0

23.0

9.0

FY19

6.0

FY20

34.0

Lighting solutions

100.0

90.0

Home Appliances

100.0

91.0

100.0

90.0

100.0

92.0

5.0

FY21

4.0

FY22

FY23

FY24

FY18

Source: Company, MOFSL

August 2024

Dixon Technologies

Financial Outlook

Exhibit 32: Segmental Financial outlook across segments for DIXON

INR m

Consolidated

Revenue

Growth YoY (%)

EBITDA

EBITDA margin (%)

RoCE

Consumer Electronics

Revenue

Growth YoY (%)

EBITDA

EBITDA margin (%)

Lighting Products

Revenue

Growth YoY (%)

EBITDA

EBITDA margin (%)

Home Appliances

Revenue

Growth YoY (%)

EBITDA

EBITDA margin (%)

Mobile Phone and EMS

Revenue

Growth YoY (%)

EBITDA

EBITDA margin (%)

Security Surveillance Systems

Revenue

Growth YoY (%)

EBITDA

EBITDA margin (%)

Refrigerator

Revenue

Growth YoY (%)

EBITDA

EBITDA margin (%)

350

7.0

5,000

8,500

70.0

638

7.5

12,000

41.2

900

7.5

0.8

963

2,164

124.7

3.3

2,178

0.7

2.9

3,964

82.0

151

3.8

4,918

24.1

144

2.9

6,330

28.7

119

1.9

6,698

-17.4

1.0

3,549

-47.0

2.1

5,369

51.3

191

3.6

8,395

56.4

394

4.7

31,383

273.8

971

3.1

52,243 1,09,190 2,61,481 3,51,719 4,30,632

66.5

1,671

3.2

109.0

3,550

3.3

139.5

8,763

3.4

34.5

12,139

3.5

22.4

15,293

3.6

2,503

33.1

308

12.3

3,744

49.6

370

9.9

3,963

5.9

461

11.6

4,311

8.8

397

9.2

7,088

64.4

541

7.6

11,435

61.3

1,094

9.6

12,050

5.4

1,301

10.8

14,868

23.4

1,709

11.5

17,530

17.9

2,050

11.7

20,596

17.5

2,409

11.7

7,742

40.6

473

6.1

9,194

18.8

660

7.2

11,397

24.0

977

8.6

11,037

-3.2

974

8.8

12,841

16.3

881

6.9

10,546

-17.9

904

8.6

7,870

-25.4

592

7.5

8,670

10.2

695

8.0

9,550

10.2

804

8.4

10,521

10.2

907

8.6

10,735

27.1

222

2.1

11,937

11.2

252

2.1

20,952

75.5

503

2.4

38,426

83.4

1,028

2.7

51,695

34.5

1,246

2.4

42,780

-17.2

1,306

3.1

41,480

-3.0

1,410

3.4

43,800

5.6

1,620

3.7

47,515

8.5

1,900

4.0

51,558

8.5

2,165

4.2

28,416

15.7

1,120

3.9

23.4

29,844

5.0

1,349

4.5

18.5

44,001

47.4

2,231

5.1

25.9

64,482 1,06,971 1,21,920 1,76,909 3,33,818 4,34,814 5,25,307

46.5

2,866

4.4

23.8

65.9

3,791

3.5

19.1

14.0

5,128

4.2

20.4

45.1

6,976

3.9

25.6

88.7

13,138

3.9

38.1

30.3

17,531

4.0

38.6

20.8

21,674

4.1

36.0

FY18

FY19

FY20

FY21

FY22

FY23

FY24

FY25E

FY26E

FY27E

August 2024

Dixon Technologies

Exhibit 33:

We expect revenue to grow at a CAGR of 44%

over FY24-27 led by mobile and new segments (INR m)

Revenue (INR b)

65.9

47.4

46.5

14.0

5.0

29.8

FY19

44.0

FY20

64.5 107.0 121.9 176.9 333.8 434.8 525.3

FY21

FY22

FY23

FY24 FY25E FY26E FY27E

45.1

30.3

20.8

Exhibit 34:

We expect EBITDA CAGR of 46% over FY24-27 on

focus towards margin improvement (INR m)

EBITDA (INR b)

EBITDA margin (%)

4.2

3.9

4.0

4.1

YoY%

88.7

5.1

4.5

4.4

3.5

1.3

FY19

2.2

FY20

2.9

FY21

3.8

FY22

5.1

FY23

7.0

13.1

17.5

21.7

FY24 FY25E FY26E FY27E

Exhibit 35:

We expect PAT CAGR of 51% over FY24-27 led by

strong revenue and EBITDA growth (INR m)

Adjusted PAT (INR B)

2.7

2.5

2.1

1.8

Adjusted PAT margin (%)

2.1

2.2

2.4

Exhibit 36:

We expect OCF and FCF to remain strong as

working capital cycle is lean for DIXON (INR m)

OCF (INR m)

FCF (INR m)

2.1

2.0

0.6

FY19

1.2

FY20

1.6

FY21

1.9

FY22

2.6

3.7

6.6

9.7

12.8

FY23 FY24E FY25E FY26E FY27E

FY19

FY20

FY21

FY22

FY23

FY24 FY25E FY26E FY27E

Exhibit 37:

We expect NWC cycle to remain lean for DIXON

(days)

Working capital (days)

Exhibit 38:

We expect RoE/RoCE to improve on continued

focus on capital allocation and improved asset turnover (%)

RoE (%)

RoCE (%)

32.9

34.5

32.5

-1

18.3

18.5

FY19

26.2

25.0

21.9

22.4

24.7

38.1

38.6

36.0

25.9

23.8

19.1

20.4

25.6

FY19

FY20

FY21

FY22

FY23 FY24E FY25E FY26E FY27E

FY20

FY21

FY22

FY23 FY24E FY25E FY26E FY27E

Exhibit 39:

Asset turnover to improve on higher share of

revenues from mobile and EMS segment (x)

Asset turnover (x)

12.8

13.9

Exhibit 40:

We expect company to keep investing in capex

for mobile segment and backward integration (INR m)

Capex (INR m)

5,840

4,174

4,500

5,000 5,000 5,000

14.4

11.1

10.7

14.4

15.5

15.9

12.1

1,670

879

836

FY19

FY20

FY21

FY22

FY23 FY24E FY25E FY26E FY27E

Source: Company, MOFSL

FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E

Source: Company, MOFSL

August 2024

Dixon Technologies

Valuation and recommendation

The stock is currently trading at 75.9x/57.8x P/E on FY25/26E earnings. We initiate

coverage on DIXON with a

BUY

rating and a DCF-based TP of INR15,000 taking into

account 20-year revenue CAGR of 17.8% and EBITDA CAGR of 18.6%, asset turnover

of 13-14x over the same period. We bake in WACC of 10.7% and terminal growth

rate of 6%.

Exhibit 41:

Bear /Base/ Bull case scenario

Assumptions

Target price

Bear case

Higher WACC 11.1%,

Terminal growth rate 3%

10,677

Base case

WACC of 10.7% and

Terminal growth rate 6%

15,000

Bull case

Lower WACC 10.3%

Terminal growth rate 6.5%

18,186

Rationale



We take sensitivity in

DCF assumptions

August 2024

Dixon Technologies

Key risks: Demand slowdown and loss in key client

relationships

DIXON’s performance is subject to the following risks associated:



Slower industry growth.

Any slowdown in growth of the EMS industry and

spending by OEMs, particularly in mobile, TV and consumer durables, can

impact revenue growth of the company.

Lower wallet share from key clients.

Any loss of relationship with anchor clients

can impact financials of the company. DIXON is dependent on a few key/anchor

clients in each of its segments. However, DIXON has diversified over last few

years across segments and across clients to tide over this risk.

Increased competition.

Many players have started entering segments like

mobile, TV, washing machine, lighting and competition will increase over time in

most EMS segments. Increased competition could result in significant price

competition or lower margins or loss of market share. However, DIXON has over

time increased its wallet share and has achieved scale benefits. Hence, company

is better placed than other players.

Limited bargaining power with clients.

DIXON has large exposure to HVLM

segments and operates at thin margins with limited bargaining power with

clients. In order to hedge against the margin risk, it focuses on efficient capital

allocation, which improves its RoCE despite lower margins.

Backward integration requires capex.

DIXON is focusing on investments across

R&D, technology and backward integration in order to improve ODM share in

different segments. This can impact the company’s return profile in the near

term.

Supply chain issues.

There is still dependence on imports of certain high-value

items in its key segments such as open cell and displays in consumer electronics,

PCB, displays, battery etc. in mobile, and chips in other segments. Supply chain

issues related to chip unavailability and raw material shortage impacted margins

in FY22. Any recurrence of these issues can lead to margin pressure.

August 2024

Dixon Technologies

SWOT analysis



Present in high-growth

segments of electronics

manufacturing



Enjoys high market share

in existing segments



Advantage of scale in

existing segments and

replicating the same in

newer segments



Continuously adding

capabilities to widen

offerings and segments



Continued investment in

building R&D, technology

tie-ups and backward

integration



Upfront capex required

to enter new segments

or for backward

integration



Limited bargaining

power with clients



Focus on high-volume

low-margin segments



‘Make in India’ and

various PLI schemes

provide a strong

addressable market

opportunity for DIXON in

the EMS segment



DIXON can capitalize on

new growth areas based

on its existing experience

in scaling up segments



Export opportunity across

various segments



Increased competition



Slowdown in industry

growth



Loss of business from

anchor clients



Chip availability and

supply chain issues

August 2024

Dixon Technologies

Management Team

Mr. Sunil Vachani - Executive Chairman

Mr. Sunil Vachani is the promoter of the company and has been associated with

DIXON since inception. He holds a degree of Associate of Applied Arts in business

administration from the American College in London. He is responsible for the

company's growth and business development. Mr. Vachani has over 28 years of

experience in the EMS industry. He has held positions like Chairman of the

Electronics and Computer Software Export Promotion Council of India and Co-Chair

of the CII ICTE committee. He is currently the vice president of CEAMA.

Mr. Atul B Lall - Vice Chairman & Managing Director

Mr. Atul B Lall has been associated with the company since inception. He holds a

master's degree in management studies from the Birla Institute of Technology and

Science, Pilani. He is responsible for the company's overall business operations. He

has nearly three decades of experience in the EMS industry. He has served as a

member of the Technical Evaluation Committee for Electronics Manufacturing

Services under M-SIPS constituted by the DeitY and served as a representative of

ELCINA on the Committee for Reliability of Electronic and Electrical Components and

Equipment (LITD. 02) of the BIS.

Mr. Saurabh Gupta - Chief Financial Officer (CFO)

Mr. Saurabh Gupta has an experience of over 15 years in the field of finance and

strategy. He was last associated with cinema chain PVR as Vice President until

Aug'17. He also worked with reputed companies like Gumberg India, Unitech, and

McKinsey. He holds a bachelor’s degree in Commerce from Delhi University and

MBA (Executive program) from MDI, Gurgaon. He is an associate of ICAI.

Mr. Abhijit Kotnis - President & COO -Consumer Electronics

Mr. Abhijit Kotnis has over 28 years of experience across manufacturing, technology,

business development and sourcing fields. He holds an MBA in Marketing &

Operations and BE in Electronics & Telecommunications from Marathwada

University, Aurangabad. He has also completed his Post Graduate Program in

Management (MEP) from IIM, Ahmedabad. Prior to joining DIXON, Mr. Kotnis was

associated with Videocon Group for close to three decades in various roles and his

last position was CMO/CTO.

Mr. Kamlesh Kumar Mishra - President- Mobile

Mr. Kamlesh Kumar Mishra is responsible for overseeing operations of mobile, CCTV

and DVR divisions and working of executives in production, marketing, finance and

quality. He holds a Bachelor's degree in Electronics and Telecomm from the

Government College of Engineering, Aurangabad. In the past, he worked with

Samsung India Electronics, Kushang and Videocon International. He has a total

experience of close to three decades in lean manufacturing, plant engineering,

manufacturing, shop floor operational excellence, production planning & control,

productivity management, sub-contracting management, new product & part

development and team management.

August 2024

Dixon Technologies

Mr. Rajeev Lonial - President & COO - Home Appliances

Mr. Rajeev Lonial is responsible for the washing machine vertical, along with

backward integration and the overall manufacturing efficiency, quality, service and

cost efficiency management of resources in the home appliances vertical. He holds a

Post Graduate Diploma in Plastic Processing Technology from the Central Institute of

Plastic Engineering & Tools. In the past, he worked with Dipty Lal Judge Mal, Noble

Moulds, Evershine Moulding, Ever Shine Plastic Industries, Essen Fabrication &

Engineering and Shree Keshav Lab. He has more than 30 years of experience in the

field of plastics moulding.

Mr. Pankaj Sharma - President & COO -Security & Surveillance

Mr. Pankaj Sharma is the President and COO - Security Surveillance, responsible for

overseeing operation of the verticals and working of executives in production,

marketing, finance and quality. He holds a Bachelor's Degree in Arts from University

of Delhi. In the past, he worked with Bigesto Foods, Satkar Exports, Bestavision

Electronics, Samsung Co. Ltd, Jain Tube Company and Shirllon Co. Ltd. He has close

to three decades of experience in factory operations, manufacturing, supply chain,

global sourcing, and business development.

Mr. Nirupam Sahay - President & COO -Lighting business

Mr. Nirupam Sahay is President & COO - Lighting Solutions. He has a career spanning

over 28 years in sales, marketing, operations and general management/P&L

management across the industries of paints, consumer durables, financial services

and lighting. He previously worked with Surya Roshni, Philips Lighting (now called

Signify), and Philips Lighting Indian Subcontinent. He graduated in Economics

Honours from St. Stephen's College, Delhi, completed his MBA from Narsee Monjee

Institute of Management Studies (NMIMS), Mumbai, and completed an Advanced

Management Program at the Warton School.

Mr. Sukhvinder Kumar - Business Head - Telecommunications

Mr. Sukhvinder Kumar is Business Head - Telecommunications. He has a vast

experience of over 27 years in the field of electronics as well as managing various

business operations. Mr. Kumar has completed his engineering degree in electronics

and attained an advance management program certificate from IIM Bangalore.

Mr. Ashish Kumar - Chief Legal Counsel & Group CS

Mr. Ashish Kumar is Chief Legal Counsel and Group CS of the company. He leads the

secretarial, compliance, legal, HR and CSR function of the company. He is a

commerce graduate from the University of Delhi and has completed the Executive

Program in Business Management from IIM, Calcutta. He is also a fellow member of

ICSI and LLB degree holder. Prior to joining DIXON, he was associated with various

organizations like DLF Universal, Damas International, Tecom Investments FZ LLC

and Narayana Hrudayalaya. He has more than 19 years of experience in national and

international regulatory and compliance.

August 2024

Dixon Technologies

Financials and valuations

Consolidated - Income Statement

Y/E Mar

Total Income from Operations

Change (%)

Raw Materials

Gross Profit

Employee Cost

Other Expenses

Total Expenditure

% of Sales

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income

PBT bef. EO Exp.

PBT after EO Exp.

Total Tax

Tax Rate (%)

Profit share of asociates/JV

Minority Interest

Reported PAT

Adjusted PAT

Change (%)

Margin (%)

Consolidated - Balance Sheet

Y/E Mar

Equity Share Capital

Total Reserves

Net Worth

Minority Interest

Total Loans

Deferred Tax Liabilities

Capital Employed

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Goodwill on Consolidation

Capital WIP

Total Investments

Curr. Assets, Loans & Adv.

Inventory

Account Receivables

Cash and Bank Balance

Loans and Advances

Other Current Asset

Curr. Liability & Prov.

Account Payables

Other Current Liabilities

Provisions

Net Current Assets

Appl. of Funds

FY20

44,001

47.4

38,602

5,399

1,180

1,989

41,771

94.9

2,231

5.1

365

1,865

350

1,568

363

23.1

0.0

1,205

90.2

2.7

FY21

64,482

46.5

57,697

6,785

1,371

2,548

61,616

95.6

2,866

4.4

437

2,429

274

2,170

572

26.4

0.0

1,598

32.6

2.5

FY22

1,06,971

65.9

97,792

9,178

1,978

3,409

1,03,180

96.5

3,791

3.5

840

2,952

442

2,548

644

25.3

-0.6

1,902

19.0

1.8

FY23

1,21,920

14.0

1,10,207

11,713

2,517

4,069

1,16,793

95.8

5,128

4.2

1,146

3,981

606

3,432

897

26.1

16.2

-4

2,555

34.4

2.1

FY24

1,76,909

45.1

1,60,390

16,520

3,327

6,217

1,69,933

96.1

6,976

3.9

1,619

5,357

747

226

4,836

1,189

24.6

102.4

3,677

43.9

2.1

FY25E

3,33,818

88.7

3,02,647

31,171

6,891

11,143

3,20,680

96.1

13,138

3.9

2,285

10,853

745

304

10,411

2,744

26.4

307.2

1,325

6,649

80.8

2.0

FY26E

4,34,814

30.3

3,94,212

40,602

8,976

14,096

4,17,283

96.0

17,531

4.0

2,744

14,787

794

737

14,729

3,857

26.2

337.9

1,475

9,734

46.4

2.2

(INR m)

FY27E

5,25,307

20.8

4,76,255

49,052

10,843

16,535

5,03,633

95.9

21,674

4.1

3,207

18,467

823

1,377

19,021

4,965

26.1

371.7

1,645

12,783

31.3

2.4

(INR m)

FY27E

120

45,458

45,578

4,722

1,705

240

52,244

35,633

11,216

24,416

303

683

200

1,71,165

50,331

68,826

28,986

22,962

1,44,524

1,20,711

22,991

823

26,641

52,244

FY20

116

5,298

5,413

828

148

6,389

3,982

825

3,157

13,635

4,978

5,151

1,002

2,504

10,580

9,391

1,081

109

3,054

6,389

FY21

117

7,256

7,373

1,513

184

9,070

5,269

1,170

4,099

724

953

22,600

7,433

10,891

689

3,563

19,387

17,097

2,146

144

3,213

9,070

FY22

119

9,849

9,968

4,580

201

14,754

9,586

1,815

7,771

303

224

1,410

33,064

11,557

13,564

1,823

6,116

28,017

23,137

4,664

216

5,047

14,754

FY23

119

12,730

12,849

-3

1,826

224

14,897

12,291

2,641

9,649

303

1,197

442

35,203

9,579

17,155

2,292

6,178

31,898

24,519

7,121

258

3,306

14,897

FY24

120

16,829

16,949

276

1,550

240

19,015

20,633

3,958

16,675

303

683

200

52,034

16,950

23,179

2,087

9,799

50,881

40,652

9,952

277

1,153

19,015

FY25E

120

23,299

23,419

1,601

1,705

240

26,965

25,633

5,947

19,685

303

683

200

98,972

31,984

43,737

7,647

15,566

92,879

76,708

15,647

523

6,093

26,965

FY26E

120

32,854

32,974

3,077

1,705

240

37,995

30,633

8,367

22,266

303

683

200

1,34,618

41,661

56,970

16,510

19,428

1,20,075

99,916

19,478

681

14,543

37,996

August 2024

Dixon Technologies

Financials and valuations

Ratios

Y/E Mar

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

Dividend Yield (%)

FCF per share

Return Ratios (%)

RoE

RoCE

RoIC

Working Capital Ratios

Fixed Asset Turnover (x)

Asset Turnover (x)

Inventory (Days)

Debtor (Days)

Creditor (Days)

Leverage Ratio (x)

Current Ratio

Interest Cover Ratio

Net Debt/Equity

Consolidated - Cashflow Statement

Y/E Mar

OP/(Loss) before Tax

Depreciation

Interest & Finance Charges

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

Others

CF from Operating incl EO

(Inc)/Dec in FA

Free Cash Flow

(Pur)/Sale of Investments

Others

CF from Investments

Issue of Shares

Inc/(Dec) in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Opening Balance

Other Bank Balances

Closing Balance

FY20

20.6

26.8

92.4

1.2

5.7

578.4

443.8

128.8

15.8

312.4

0.0

22.1

26.2

25.9

28.8

11.0

6.9

1.3

5.3

0.0

FY20

1,568

365

350

-429

423

2,277

2,374

-1,081

1,293

-118

-1,171

457

-570

-378

-83

-568

634

367

1,002

FY21

27.3

34.7

125.9

1.0

3.7

436.1

342.5

94.5

10.8

243.5

0.0

0.4

25.0

23.8

29.8

12.2

7.1

1.2

8.9

0.0

FY21

2,170

437

274

-549

-743

1,590

111

1,701

-1,680

-978

-2,649

269

688

-322

635

-313

1,002

689

FY22

32.0

46.2

168.0

2.0

6.3

371.3

257.6

70.8

6.6

187.0

0.0

-24.4

21.9

19.1

24.5

11.2

7.3

1.2

6.7

0.1

FY22

2,546

840

442

-540

-641

2,646

2,728

-4,174

-1,446

-446

-25

-4,645

642

3,026

-567

-59

3,043

1,126

689

1,823

FY23

42.9

62.1

215.7

3.0

7.0

277.4

191.5

55.2

5.8

138.1

0.0

46.3

22.4

20.4

26.4

9.9

8.2

1.1

6.6

-0.1

FY23

3,452

1,146

606

-820

2,764

7,148

109

7,258

-4,502

2,755

992

-45

-3,556

336

-2,776

-737

-119

-3,296

406

1,823

2,292

FY24

61.5

88.6

283.4

3.0

4.9

193.5

134.4

42.0

4.0

101.9

0.0

2.6

24.7

25.4

29.9

8.6

9.3

1.0

7.2

0.0

FY24

4,867

1,619

747

-1,218

-88

5,927

-83

5,843

-5,686

157

346

-5,309

469

-276

-494

-179

-220

-700

-166

2,292

-40

2,086

FY25E

111.2

149.4

391.6

3.0

2.7

111.2

82.7

31.6

2.2

55.8

0.0

88.1

32.9

37.7

46.4

13.0

12.4

1.1

14.6

-0.3

FY25E

9,393

2,285

745

-2,744

589

10,269

-5,000

5,269

-50

-5,050

155

-745

-179

1,325

555

5,775

2,086

-214

7,647

FY26E

162.8

208.7

551.4

3.0

1.8

75.9

59.2

22.4

1.7

41.3

0.0

144.7

34.5

38.3

55.9

14.2

11.4

1.1

18.6

-0.5

FY26E

13,591

2,744

794

-3,857

379

13,653

-5,000

8,653

-55

-5,055

-794

-179

1,475

501

9,099

7,647

-235

16,510

FY27E

213.8

267.4

762.2

3.0

1.4

57.8

46.2

16.2

1.4

32.8

0.0

203.2

32.5

35.8

63.5

14.7

10.1

1.2

22.4

-0.6

(INR m)

FY27E

17,748

3,207

823

-4,965

340

17,153

-5,000

12,153

-61

-5,061

-823

-179

1,645

643

12,735

16,510

-259

28,986

August 2024

Page # 47

Summary

Amber Enterprises:

Moving beyond cyclicality!

Amber Enterprises (Amber) is a leading player

in ODM/OEM solutions for the Indian RAC

industry. The company is one of the

beneficiaries of PLI scheme with an early-

mover advantage in PLI-led capex for RAC and

AC components. With strategic diversification

towards the high-growth electronics market

(especially PCB manufacturing) and increasing

scope of work in the mobility segment, we

expect Amber to benefit from margin

improvement. We expect the company’s

transition from Amber 1.0 (AC-focused) to

Amber 2.0 (electronics) and Amber 3.0

(mobility) to reduce business cyclicality, and

result in improved asset turnover and return

ratios after the initial few years of capex. We

expect a revenue/ EBITDA/PAT CAGR of

21%/26%/51% over FY24-27, which is likely to

be driven by mid-teens CAGR in the consumer

durable segment, high growth in the

electronics and mobility segments, along with a

92bp margin improvement over FY24-27. We

initiate coverage on Amber with a BUY rating

and a DCF-based TP of INR5,000, implying 42x

P/E on two-year forward EPS (Sep’26).

Page # 72

Valuation and recommendation

Page # 50

Story in charts

Page # 73

Company profile

Page # 53

Amber 1.0 – RAC industry:

Potential J-curve

Page # 76

Key risks: Slowdown in the

industry, input price volatility

Page # 62

Amber 2.0 – Focusing on the

high-growth electronics business

Page # 77

SWOT analysis

Page # 65

Amber 3.0 – Anticipating growth

from the Railways and Mobility

businesses

Page # 78

Management Team

Page # 79

Financials and Valuations

Page # 69

Financial outlook

June 2024

Amber Enterprises

August 2024

Initiating Coverage | Sector: EMS

Amber Enterprises

BSE SENSEX

80,437

S&P CNX

24,541

CMP: INR4,130

TP: INR5,000 (+21%)

Moving beyond cyclicality!

Buy

Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

Financials Snapshot (INR b)

Y/E MARCH

FY25E

Sales

84.6

EBITDA

6.3

EBITDA Margin (%)

7.4

PAT

2.3

EPS (INR)

68.1

EPS Growth (%)

69.6

BV/Share (INR)

680.8

Ratios

Net D/E

0.4

RoE (%)

10.5

RoCE (%)

9.8

Valuations

P/E (x)

60.7

P/BV (x)

6.1

EV/EBITDA (x)

24.0

AMBER IN

139.8 / 1.7

4888 / 2573

-9/-7/33

698

60.1

FY26E FY27E

102.2 119.4

8.4

9.9

8.2

8.3

3.5

4.6

105.1 135.7

54.3

29.1

785.8 921.5

0.3

14.3

12.1

39.3

5.3

17.8

0.1

15.9

13.4

30.4

4.5

14.7

Amber Enterprises (Amber) is a leading player in ODM/OEM solutions for the Indian

RAC industry. The company is one of the beneficiaries of PLI scheme with an early-

mover advantage in PLI-led capex for RAC and AC components. With strategic

diversification towards the high-growth electronics market (especially PCB

manufacturing) and increasing scope of work in the mobility segment, we expect

Amber to benefit from margin improvement. We expect the company’s transition from

Amber 1.0 (AC-focused) to Amber 2.0 (electronics) and Amber 3.0 (mobility) to reduce

business cyclicality, and result in improved asset turnover and return ratios after the

initial few years of capex. We expect a revenue/ EBITDA/PAT CAGR of 21%/26%/50%

over FY24-27, which is likely to be driven by mid-teens CAGR in the consumer durable

segment, high growth in the electronics and mobility segments, along with a 100bp

margin improvement over FY24-27. We initiate coverage on Amber with a BUY rating

and a DCF-based TP of INR5,000, implying 42x P/E on two-year forward EPS (Sep’26).

Key investment argument

Government’s PLI incentives and industry tailwinds driving volume

growth

We expect domestic RAC industry volumes to report a CAGR of 14% over FY24-

27, mainly fueled by improved penetration and higher per capita income. AC

penetration in India currently stands at nearly 8% vs. 100% for China and 90%/

42% for the US/Global average. To cater to the improved demand of RAC and

RAC components, several OEM/ODM players announced capex under the

government’s PLI scheme for white goods. Since the announcement of PLI

scheme, the value addition in domestic RAC industry has moved up from 25% to

45% and we expect it to further move up to 60-70% by FY27, with indigenization

of other AC components. Though we have witnessed insourcing from various

OEM players, after the PLI-led capex, ODM players are catering to the growing

RAC market by higher RAC components. With large capacities already coming

from various players under the PLI scheme, we expect growth to be driven

primarily by volumes while pricing gains will be limited.

Shareholding pattern (%)

Jun-24 Mar-24

As On

Promoter

39.9

40.3

DII

15.7

15.8

FII

28.4

26.0

Others

16.0

17.9

FII Includes depository receipts

Stock performance (one-year)

Amber Enterp.

Nifty - Rebased

Jun-23

40.3

12.7

24.2

22.8

Amber 1.0: Market leader in RAC ODM

Amber is a leading player in RAC ODM market with a 27% market share. It is one

of the key beneficiaries of the PLI scheme for white goods and has up-fronted

capex in the last two years on RAC and RAC components. Additionally, Amber

has focused on backward integration into components. Amber is the only player

that caters to 70% of BoM for RAC and non-RAC components in the industry

through its various entities – ILJIN and EVER (PCBA), PICL, PR, and Pravartaka

(motors, cross flow fans, injection molding, etc.). Amber’s strategy to expand

across the component business is helping the company maintain its market

share even with reduced share of outsourcing from AC OEM players from 48-

50% earlier to 30-35% currently for the ODM players. The company expects

4,600

3,950

3,300

2,650

2,000

August 2024

Amber Enterprises

to maintain its market share with its component offerings even if the share of

outsourcing reduces further to 25% from OEM players. It has also formed a JV with

Resojet to manufacture fully automatic top- and front-load washing machines,

which is undergoing client approvals. We expect the overall consumer durables

(RAC+ Components + Motor + Other segments) revenue to report a 17% CAGR over

FY24-27.

Amber 2.0: Diversifying into the high-growth electronics segment

Amber is transitioning from a cyclical and low-margin business to a non-cyclical and

high-margin business by increasing its presence across the RAC components and

electronics industries. The company is expanding its presence from PCB assembly to

manufacturing bare board PCB through acquisition of Ascent circuits, thereby

catering to a wide range of market segments such as aerospace & defense, railways,

industrial, telecom, automobile, healthcare, hearable & wearable, and consumer

durables. Amber has also signed an MoU with Korea Circuits through Ascent Circuits

to manufacture Flex, HDI, and Semiconductor substrate PCBs, thereby fortifying PCB

manufacturing in India. We expect the electronics division’s revenue to reflect the

acquisition of Ascent Circuits from FY25 and expect its revenue to grow at a CAGR of

33% over FY24-27. Management targets to achieve a 7.5-8.0% EBITDA margin and

expects around 45% growth in FY25 in the electronics segment.

Amber 3.0: JV with Titagarh for the railway subsystems

Amber entered into a JV with Titagarh Rail systems to provide comprehensive

integrated solutions to rolling stock manufacturers for railway subsystems in India &

overseas. This JV will invest EUR20m into Titagarh Firema SPA, Italy which in turn

will give a preferred supplier status and right of first refusal for all their products to

Sidwal (Amber acquired Sidwal in 2019 to expand its offerings in mobility AC

solutions), Titagarh Rail and their JVs. The strategic partnership in Firema will

facilitate Sidwal’s entry into the European market/global play. This will also provide

Sidwal with a preferred access to Firema’s own demand. Domestically, this JV not

only increases technical capabilities of Amber to address a larger portion of Bill of

material (BoM) of a train coach but also enables its entry into subsystems for the

fast-growing railway segment in India (particularly for upcoming Vande Bharat as

well as metro trains). Sidwal now addresses INR11m per passenger car, expanding

the addressable market. Sidwal has an order book of INR20b. We thus expect the

mobility segment to grow at a much faster rate for Amber after its initial capex for

expanding across subsystems is done. Order inflows in this segment were impacted

in 1QFY25 by delayed ordering. We assume revenue for the mobility segment to

report a CAGR 30% over FY24-27 with FY25 to be a weak year.

Capital allocation more oriented towards railways and electronics

Amber has already up fronted the capex for RAC components under the PLI scheme

across its five plants during last two years. We expect a capex of INR4.0b in FY25 and

INR3.5b for the next two years to take into account the capex for Sidwal and the

electronics division. We expect the capex to be split at 60:40 ratio for railways and

electronics. With incremental opportunities across both railways and electronics, we

expect asset turnover ratios for Amber to improve from FY26 onwards along with

margin improvement on better revenue mix. This will drive RoCE improvement for

the company.

August 2024

Amber Enterprises

Financial outlook

We expect Amber’s revenue to report a 21% CAGR over FY24-27 driven by 17%/

33%/30% CAGR in consumer durables/electronics/mobility segments. We expect its

gross margin to range around 18.3% and EBITDA margin to be 7.4%/8.2%/8.3% for

FY25/FY26/FY27E, 100bp higher than the FY24 level, as we factor in improved

revenue mix in favor of higher margin segments. We expect 50% PAT CAGR over the

same period driven by improved revenue as well as margins. We model a capex of

INR4b in FY25 and INR3.5b each for next two years as Amber is continuously

investing across components, electronics, and railways to widen its scope of

offerings. With improvement in margins and stable working capital, we project an

OCF of INR2.2b/INR6.6b/INR7.9b for FY25/FY26/FY27. However, FCF may remain

weak at INR(1.8b)/INR3.1b/INR4.3b due to higher capex over the next 2-3 years. We

thus expect its RoE/RoCE to start moving up over the next 2-3 years.

Valuation and recommendation

The stock is currently trading at 60.7x/39.3x/30.4x P/E on FY25/26/27E earnings. We

initiate coverage on Amber with a BUY rating and a DCF-based TP of INR5,000

implying 42x P/E on a two-year forward EPS (Sep’26). Our assumptions take into

account 20-year revenue CAGR of 12% and EBITDA CAGR of 13%, asset turnover of

3.5-4x over the same period. We bake in WACC of 10.6% and terminal growth rate

of 5%.

Key risks and concerns

Lower-than-expected demand growth in the RAC industry, change in BEE norms

making products costlier, and increased competition across RAC, mobility, and

electronics segments.

August 2024

Amber Enterprises

STORY IN CHARTS

AMBER: KEY INVESTMENT ARGUMENT

Government’s PLI

incentives and industry

tailwinds driving

volume growth

Amber 2.0: Diversifying

into the high-growth

electronics segment

Capital allocation more

oriented towards

railways and

electronics

Amber 1.0: Market

leader in RAC ODM

Amber 3.0: JV with

Titagarh for the railway

subsystems

AMBER’S TRANSITION

Amber 1.0

(AC-focused)

Amber 2.0

(Electronics)

Amber 3.0

(Mobility)

We expect the company’s transition to reduce business cyclicality, and result in improved asset

turnover and return ratios after the initial few years of capex.

August 2024

Amber Enterprises

Share of RAC industry at OEM/ODM level stands around 70%

RAC industry size (INR b)

69.2

67.9

66.5

148

171

116

FY20

179

129

122

FY22

176

FY23

183

FY24

250

FY25E

280

FY26E

314

FY27E

67.9

252

262

357

400

RAC industry at OEM/ODM level (INR b)

Share at OEM/ODM level (%)

70.0

448

FY19

FY21

Heat exchanger, PCBA and compressor form major

portion of RAC Bill of material (BoM) (%)

Amber can cater to nearly 70% of BoM through higher

share of backward integration (%)

We expect Amber’s market share to stabilize around 24-25%

in RAC and RAC related components

RAC Industry size at ODM/OEM level (INR b)

Amber market share (%)

26.2

24.9

With increased focus in other segments, we expect revenue

share from non-AC to improve (%)

RAC & Components (%)

17.1

Non-AC (%)

26.6

29.4

27.3

22.0

24.4

24.9

25.4

21.0

21.8

22.3

23.0

25.6

27.8

31.8

33.2

82.9

FY19

116

FY20

FY21

122

FY22

176

FY23

183

250

280

314

79.0

78.2

77.7

77.0

74.4

72.2

68.2

66.8

FY24 FY25E FY26E FY27E

FY19 FY20 FY21 FY22 FY23 FY24 FY25E FY26E FY27E

We expect EBITDA margin improvement to be led by

improved product mix

EBITDA (INR b)

7.7

7.8

7.3

EBITDA margin (%)

7.4

8.2

8.3

This will also lead to overall PAT margin improvement over

FY25-27

Adjusted PAT (INR B)

4.0

3.4

2.7

2.6

2.3

2.7

2.0

3.5

Adjusted PAT margin (%)

3.8

6.5

6.0

2.1

FY19

3.1

FY20

2.2

FY21

2.8

FY22

4.2

FY23

4.9

6.3

8.4

9.9

0.9

FY19

1.6

FY20

0.8

FY21

1.1

FY22

1.6

FY23

1.3

2.3

3.5

4.6

FY24 FY25E FY26E FY27E

August 2024

Amber Enterprises

We expect the NWC cycle to remain comfortable at around

19 days

Working capital (days)

51.1

43.7

32.4

30.3

21.6

18.7

2.3

FY19 FY20 FY21 FY22 FY23 FY24 FY25E FY26E FY27E

18.7

We expect net debt to remain high over next two years due

to higher capex

Net Debt (INR b)

Net debt to Equity ratio (x)

0.4x

0.3x

0.2x

0.1x

0.0x

1.9

FY19

2.0

FY20

-0.5

FY21

2.4

FY22

5.9

FY23

5.2

8.8

7.3

4.5

0.3x

0.1x

0.3x

FY24 FY25E FY26E FY27E

We expect FCF to gradually improve once capex starts

reducing

OCF (INR b)

FCF (INR b)

This will result in ROE and RoCE to improve to double digit

levels by FY26/27 (%)

RoE (%)

RoCE (%)

14.3

15.9

15.0

10.0

15.0

6.0

10.1

6.6

FY19

FY20

FY21

FY22

FY23

FY24 FY25E FY26E FY27E

FY19

FY20

FY21

6.1

FY22

6.5

8.2

10.5

8.6

6.7

7.8

9.8

12.1

13.4

FY23

FY24 FY25E FY26E FY27E

PLI investment committed by the RAC (ODM/OEM) players, where Amber is the highest contributor with INR6.2b (INR m)

Share of investment in PLI for AC components

6,275

5,387

3,580

3,210

3,000

1,560

1,127

1,007

1,000

Amber Group

Daikin

E-Pack

Durables

LG Electronics

Technoplast

Blue Star

Havells India

Johnson

Controls

Voltas

Source: Company, MOFSL

August 2024

Amber Enterprises

Amber 1.0 – RAC industry: Potential J-curve

The domestic RAC industry has witnessed a lot of initiatives over the past few years from

the government side, such as the ban on fully-assembled AC imports with refrigerants, the

PMP scheme, and PLI for AC components. These initiatives have opened up opportunities

for domestic players. Driven by these measures, value addition in the domestic AC industry

has already improved to ~48% from 25% at the time of PLI scheme. This is targeted to grow

to 75% by FY27. We highlight below the key opportunities emerging from the RAC industry

and how Amber is positioned in the ODM market.

The volumes of the domestic RAC industry stood at ~9.4m units with an industry size

of INR262b in FY24. We expect the AC industry to report a 19% volume CAGR and

20% value CAGR over the next three years, reaching 15.7m units and INR448b by

FY27, respectively. The growth will be propelled by improved penetration and per

capital income. The government’s PLI scheme as well as the ban on imports of

refrigerant-filled AC has helped the industry reduce import dependence at both

OEM and ODM levels. The domestic AC industry is dominated by 6-7 OEM players

(Voltas, Havells (Lloyd), Daikin, LG, Hitachi, and Blue Star) that are catering to the

demand from insourcing and outsourcing to three ODM players (Amber, PG

Electroplast, and EPACK Durable). Within the ODM market, Amber is a key

beneficiary of the PLI scheme and has a market share of 27.3%. We expect it to

benefit from the increased offerings across components despite higher insourcing

from OEM players.

RAC industry growth and outlook

The split ACs accounted for 89% of the total AC industry volumes, while the rest

comprised window ACs. By FY28, split AC penetration is estimated to rise to 92%,

driven by heightened demand.

The ODM companies supplied 6.1m units (WAC + Split IDU + Split ODU Kits + Split

ODU) to the RAC brands in FY23, of which 5.1m units were manufactured

domestically and the rest were imported as kits and gas charging was done in India.

This translated into an INR58-60b ODM/OEM market in FY23 – INR48-50b for

domestically-manufactured units and rest for the gas-charged units. The Indian RAC

ODM market is likely to witness a 13.3% volume CAGR to reach 11.4m units by FY28.

August 2024

Amber Enterprises

Exhibit 1: RAC industry volumes are likely to post a CAGR of

12% over the next five years (m, %)

RAC units (in m)

23.1

4.8

10.8

-27.8

31.3

Growth YoY (%)

33.0

11.9

12.0

Exhibit 2: Share of RAC industry at OEM and ODM levels

stands at 70% (%)

Share at OEM/ODM level (%)

70.0

69.2

67.9

66.5

67.9

70.0

6.5

FY19

7.2

FY20

5.2

FY21

6.4

FY22

8.4

FY23

9.4

12.5

14.0

15.7

FY19 FY20 FY21 FY22 FY23 FY24 FY25E FY26E FY27E

Source: Company, MOFSL

FY24 FY25E FY26E FY27E

Source: Company, MOFSL

Exhibit 3: Split AC penetration growing YoY (%)

Split AC

16.4

16.9

15.3

Window AC

12.3

12.8

10.7

Exhibit 4: Import dependency reduced YoY (%)

Domestic manufacturing

10.0

Imports

8.0

6.0

45.0

83.6

83.1

84.7

87.7

87.2

89.3

33.0

25.0

55.0

67.0

75.0

90.0

92.0

94.0

FY18

FY19

FY20

FY21

FY22

FY23

FY18

FY19

FY20

FY21

FY22

FY23

Source: Company, MOFSL

Penetration level of ACs is much lower in India vs. other nations

The penetration level of RACs is extremely low at 8% in India when compared to

various developed economies. The level is only one-fifth of the global average (RAC)

penetration. This indicates that there is a tremendous potential of growth in the

domestic RAC market in the long term. Further, RAC penetration is the lowest

among consumer durables vs. washing machines (12%), refrigerators (33%), and

televisions (65%).

Exhibit 5: RAC penetration in India is the lowest among

other countries…

80%

90% 91%

100%

33%

37%

Exhibit 6: …and it is also the lowest among other consumer

durable categories

65%

42%

30% 36%

44% 49%

12% 16%

12%

17%

Source: Company, MOFSL

August 2024

Amber Enterprises

Government measures and PLI benefits

In a recent move, the application window for the PLI Scheme for White Goods (ACs

and LED Lights) is being reopened for 90 days from 15th July, 24 to 12th Oct, 2024.

This is based on the appetite of the Industry to invest more under the Scheme,

which is an outcome of the growing market and confidence generated due to

manufacturing of key components of ACs and LED Lights in India under the PLIWG

Scheme.

The government’s PLI scheme for White goods is intended to increase domestic

manufacturing across high-value and low-value intermediaries. The govt. has

envisaged significant investments and shortlisted key players, e.g., Voltas, Blue Star,

Daikin, Johnson Controls, as well as other prominent ODM companies such as

Amber, PG Electroplast, and EPACK Durable (including players focusing on

component manufacturing) for PLI incentives. The govt. plans to spend INR48b over

the next five years. Among ODM players, Amber, along with its subsidiary ILJIN,

plans for a total capex of INR6.3b for PLI (the highest contribution into the scheme

by any ODM), followed by EPACK Durable (INR3.5b) and PG Electroplast (INR3.2b).

The import dependence is higher for key components of high-value intermediaries

such as compressors, copper tubes, and aluminum stock, while production of low-

value intermediaries such as control assemblies, display panels, motors, cross-flow

fans, valves, brass components, heat exchangers, sheet metal, and plastic molding

components has started ramping up domestically.

For high-value intermediaries such as compressors, increased investments are seen

from GMCC, Highly, and Daikin, while other players will start adding up more.



Voltas has revived its manufacturing plans in India through partnerships with

firms from Japan or Korea, with investments worth INR13b for compressors and

other AC components.



Daikin has commenced its facility for AC (1.5m units) and compressors (3m

units) in Sricity in FY24.

For copper tubes and aluminum stock, domestic players like Adani Copper Tubes,

Hindalco, and Mettube are already incurring capex. For low-value intermediaries,

Amber, EPACK Durable, and PG Electroplast dominate the investments followed by

OEM players.

Exhibit 7: A larger share of PLI investments is coming from RAC ODMs and RAC component

suppliers

RAC Component

Suppliers

40%

AC Brands

30%

INR48b

RAC ODM's

30%

Source: Company, MOFSL

August 2024

Amber Enterprises

Exhibit 8: Committed investments by industry players in White Goods PLI Scheme

Products to be manufactured

Control

assembly Comp-

for IDU & ressor

ODU

Cross

Flow

Fan

Copper

Display Sheet

Plastic Valves &

Tube

Panel

Metal Molding Brass

(plain

(LCD/ Compo- Compo- Compo-

and/or

LED)

nent

grooved)

Aluminum

Stocks

for Foils

& Fins

for Heat

exchangers

Comm-

itted

Invest-

ment

(INR m)

Applicant

Motor

Heat

Exchanger

List of brands selected under

PLI Scheme for White Goods (Air Conditioners)

Daikin Airconditioning India Pvt Ltd

LG Electronics India Pvt Ltd

Blue Star Climatech Ltd

Havells India Ltd

Johnson Controls Hitachi AC India Ltd

Voltas Ltd

IFB Industries Ltd

Panasonic India Pvt Ltd

Mitsubishi Electric India Pvt Ltd

Total

List of RAC ODMs selected under

PLI Scheme for White Goods (Air Conditioners)

Amber Enterprises India Ltd (+)

IL Jin Electronics India Pvt Ltd

EPACK Durable Solutions Pvt Ltd (+)

Epavo Electricals Pvt Ltd

PG Technoplast Pvt Ltd

Bhagwati Products Ltd

Virtuoso Optoelectronics Ltd

Total

List of RAC Component suppliers selected under

PLI Scheme for White Goods

(Air Conditioners)

Hindalco Industries Ltd

Adani Copper Tubes Ltd

Mettube India Pvt Ltd

Napino Auto and Electronics Ltd

Lucas-TVS Ltd

Nidec India Pvt Ltd

Dixon Devices Pvt Ltd

Syrma Technology Pvt Ltd

VVDN Technologies Pvt Ltd

East India Technologies Pvt Ltd

Magnum MI Steel Pvt Ltd

Sun Home Appliances Pvt Ltd

Triton Valves Climatech Pvt Ltd

Starion India Pvt Ltd

Kaynes Technology India Ltd

Swaminathan Enterprises Pvt Ltd

Total

Grand Total

























5,387

3,000

1,560

1,127

1,007

1,000

570

500

14,651





























6,275

3,580

3,210



610

505

14,180







5,390

4,080

3,002

666

540

519

510





































510

500



500

501

500

19,228

48,059





Source: Company, MOFSL

Competition to remain intense in the RAC industry, thus curbing realization

growth

The RAC industry appears to be witnessing a phase of intense competition owing to

rapid capacity expansion. The Indian RAC market is a fairly organized market with

participation of prominent global and Indian brands with a wide range of products.

Voltas, Havells (Lloyd), Daikin, LG, Hitachi, and Blue Star are the top 6 brands,

accounting for 67% of RAC sales in FY23. Additionally, many OEMs have applied for

the PLI scheme for AC components and are increasing their in-house capacities. A

significant portion of their targeted capex is allocated to compressors. With higher

August 2024

Amber Enterprises

capex and insourcing from AC OEMs, we expect realization growth to be limited in

RAC industry. However, in this type of market, players like Amber are capturing higher

wallet share through increased offerings on components. Hence, we expect the AC

revenue growth momentum to sustain for Amber despite weak realization growth.

Exhibit 9: RAC industry’s market share in FY23 (%)

Indian RAC market domestic volume split by competition in FY23

Panasonic

Godrej

Voltas

CMI

19%

Others

Haier

Samsung

Bluestar

7% Hitachi

Daikin

12%

Havells

12%

Source: Company, MOFSL

Exhibit 10: Capex/Capacity trend across players

INR m

Amber

PG Electroplast

EPACK

FY18

848

FY19

1,038

360

FY20

1,080

580

430

126

FY21

FY22

4,150

1,882

2,356

FY23

6,980

1,546

2,022

FY24

2,620

2,700

1,501

Near term capex plans



Capex of INR 2-2.25b in Sidwal for product

facility expansion between FY25-26



Capex of INR 2.7b was done in FY24



Voltas is doubling production capacity for

AC and commercial refrigeration

categories in Chennai and Waghodia,

alongwith development of components

ecosystem in consumer durable sector. It is

committing total capex outflow of

INR4,500-5,000m which will be incurred

over next 18-24 months

Management is planning a capex in range

of INR2.5-3.5b in coming two to three

years

Management planned a total capex of INR

6b in FY24

Source: Company, MOFSL

Voltas

346

818

905

208

482

1,799

2,931



Blue Star

Havells (Lloyd)

15,559

2,701

321

910

784

4,044

3,500



Exhibit 11: Amber dominates volume market share of ODM

companies in FY23 for domestically manufactured units (%)

Exhibit 12: Amber also dominates volume market share of

imported and gas charged units in FY23 (%)

Electroplast

10%

Electroplast

23%

Others

10%

EPACK

Durable

24%

Amber

46%

Source: Company, MOFSL

Amber

80%

Source: Company, MOFSL

August 2024

Amber Enterprises

Exhibit 13: Heat exchanges, PCBA, and compressors form a larger proportion of RAC BoM

breakup (%)

Sheet Metal, 8%

CFF, 1%

Plastic

Moulting, 7%

Heat Exchanger,

23%

Motor, 9%

Compper Tubing,

10%

PCBA, 22%

Compressor, 21%

Source: Company, MOFSL

Key strategies of Amber to grow the consumer durable (RAC) division

Higher capex towards components as the industry witnesses higher insourcing

With significant capex planned by RAC players under the PLI scheme, the industry

has experienced increased insourcing vs. outsourcing seen earlier. Most of the

players already shifted to in-house manufacturing with two more major brands

expected to start in 1Q-2Q of FY25. Amber, being a major player in the AC PLI

scheme, shifted its focus towards supplying components to RAC customers with the

goal of retaining a 29-30% business share. Amber supplies critical components to

almost all of its major customers, with a capability of providing 70% of BoM of

components (only player in the RAC ODM industry with a 70% BoM capability).

Management expects that demand for components will be higher than RAC in future

and hence, it has moved to supplying components to its existing customers, with a

plan to add more customers in the other consumer durables division.

Exhibit 14: We expect the consumer durable segment

revenue to post 17% CAGR over FY25-27

Consumer Durables (INR b)

63.2

37.2

11.7

-24.3

-6.1

38.0

21.9

Growth YoY (%)

26.2

Exhibit 15: We expect Amber to maintain an ODM market

share of ~24-25%

RAC Industry size at ODM/OEM level (INR b)

Amber market share (%)

24.9

26.6

29.4

27.3

24.4

24.9

25.4

14.2

14.4

22.0

22.8

31.3

23.7

32.7

53.3

50.1

61.1

69.7

79.8

FY19

116

FY20

FY21

122

FY22

176

FY23

183

250

280

314

FY19 FY20 FY21 FY22 FY23 FY24 FY25E FY26E FY27E

Source: Company, MOFSL

FY24 FY25E FY26E FY27E

Source: Company, MOFSL

Amber’s backward integration, capex, and strategically located

manufacturing facilities

Amber has incurred a capex of INR14.9b over FY22-24, mainly towards backward

integration of RAC and components under the PLI scheme. Amber has 28 state-of-

the-art manufacturing facilities spread across strategic locations pan-India in

proximity to the customers. These facilities ensure a quicker turnaround time. In

August 2024

Amber Enterprises

FY18, the company had 10 manufacturing facilities. Later, between FY18 and

1QFY23, it added 13 more facilities and in FY23, Amber expanded with five new

manufacturing facilities for capacity expansion and backward integration.

Exhibit 16: Manufacturing facilities added in FY23 and FY24 under PLI-led capex

Manufacturing facility

Pravartaka, Greater Noida

ILJIN, Noida

Sri City (Andhra Pradesh)

Supa (Maharashtra)

Rudrapur (Uttarakhand)

Thiruvallur (Chennai)

Kanchipuram, (Tamil Nadu)

Production

Product manufactured

commencement

Jan, 2024

Jun, 2023

Jan, 2023

Dec, 2022

Jan, 2023

Nov, 2022

Oct, 2022

Injection moulding components

Wearable and hearable products

AC with backward integration of Sheet metal

components, Moulding and Heat Exchangers

Heat exchangers, Press shop, Weld shop, TPP,

IDU & ODU line and Moulding shop

Sheet metal components, Copper system tubing

PCBA for AC & other Consumer durable products

Injection moulding components

Source: Company, MOFSL

Exhibit 17: Manufacturing facilities

Business segment

Consumer Durables – 23 Facilities

RAC & Non-RAC Components

RAC FG

Motors

Tooling

Electronics – 4 facilities

PCBA's

Telecom

Wearables & Hearables

Railway Sub-systems & Mobility – 1 facility

Railway Subsystems

Location

Dehradun, Jhajjar, Pune, Greater Noida, Rudrapur,

Rajpura , Shahjanpur, Chennai, Sri City, Kadi & Manesar

Dehradun, Jhajjar, Pune & Sri City

Faridabad

Noida

Greater Noida, Pune & Chennai

Greater Noida & Chennai

Noida

Faridabad

Source: Company, MOFSL

Exhibit 18: Amber’s capex has been dominated by PLI-led

capex over the last two years

Capex (INR m)

13.7

as % of Sales

16.6

Exhibit 19: Amber’s near-term capex plan includes large

investments for railways and electronics

Segment

Electronics

FY24 capex

(INR m)

INR100-150m

Management comments



Capex would be for Noise JV in

FY25

Sidwal will be setting up a new

Greenfield facility in Faridabad for

capacity expansion of its existing

product portfolio and two more

facilities through the SPV route

(one for interiors and the other

for couplers, gear, pantograph

and other subsystems)

Source: Company, MOFSL

4.0

3.8

2.7

3.8

848

FY18

1,038

FY19

1,080

FY20

4,150

FY22

6,980

FY23

2,620

FY24

Railway

INR2,000-

Subsystems &

2,250m over

Mobility

FY25-FY26

division

Source: Company, MOFSL

August 2024

Amber Enterprises

Acquisitions and strategic tie-ups to expand the consumer durables

segment

Amber has been able to widen its client base as well as sectors through a range of

acquisitions done so far. With recent announcements of acquiring stakes in Resojet

and Ascent circuits, the company will be able to expand further in segments such as

washing machine, PCB manufacturing, etc. Company is already present in non-room

air conditioner components such as telecom components, smart meter components,

IT server components, refrigerator components, microwave, watching machine,

water purifier and automobile components and is adding more clients in front load

and top load washing machine. This will further support the growth of the consumer

durable segment, which currently forms a larger share of revenue from the RAC

segment.

Exhibit 20: Amber – acquisitions done over past few years to expand presence

Date

Acquirer

company

Acquiree Industry of

company acquisition

Acquiree

company

financials

Stake

acquired

Amount

Invested

(INR m)

Implied

valuationAbout acquire

valuation

(trailing company

(INR m)

EV/Sales)

Company

incorporated

Resojet

Amber

Consumer

on 18

21-Mar-24

Private

Enterprises

durable

Apr’22.

Limited

No turnover in

F23

Total

turnover:

FY23 –

EUR50.28m

Titagarh

FY22 –

Shivaliks Firema SpA

EUR72.28m

Mercantile

(an

FY21 –

Mobility

22-Feb-24 Pvt. Ltd

associate

EUR67.79m

Application

(Sidwal’s JV- company of

Total income:

SPV)

Titagarh

FY23 –

Rail)

EUR(19.56)m

FY22 –

EUR(9.77)m

FY21 –

EUR(7.97)m

IL JIN

Ascent

Electronics

Circuits

F23 Revenue:

02-Feb-24 (India)

EMS

Private

INR 2,790m

Private

Limited

Pravartaka

Tooling Component

Amber

01-Feb-22

Services s (Injection

Enterprises

Private

molding)

Limited



Business of manufacturing

50%

350

700

the fully automatic top-

loading and front-loading

washing machine(s) and its

components



Titagarh Firema SpA, a

company based in Italy, is

engaged in designing &

manufacturing high-tech rail

vehicles, viz. passenger

vehicles in the category of

subways, trains, intercity

trains, and freight vehicles in

Italy.

35%

EUR20.21m

1.15x



South India based home-

60%

3,110

5,183

1.86x

grown leading player engaged

in the manufacturing of PCB



Pravartaka is one of the

60%

leading injection molding tool

market and injection molding

components maker for

consumer durable,

automotive, and electronics

industries.

Engaged in the businesses of

(i) CFF and its plastic parts, (ii)

fans and fan guard for ODU of

RAC, (iii) plastic parts for

water dispenser and

refrigeration applications

(other than the automobile

industry) and (iv) plastic parts

for seats of trucks, tractors

and buses

Source: Company, MOFSL



AmberPR

Technoplast

India

Amber

CFF and its

02-Dec-21

Pvt Ltd

Enterprises

plastic parts

(erstwhile

Pasio India

Pvt Ltd)

73%

August 2024

Amber Enterprises

We thus expect the consumer durable division (comprising RAC & Components)’s

revenue to report a CAGR of 17% over FY24-27 with EBITDA margin improving to

7.8% by FY27E from 7.0% in FY24.

Exhibit 21: Consumer durables’ revenue growth would be largely driven by RAC & non-RAC

components in near term

Consumer Durables (INR b)

63.2

37.2

Growth YoY (%)

38.0

21.9

-24.3

14.2

14.4

11.7

-6.1

22.8

FY19

31.3

FY20

23.7

FY21

32.7

FY22

53.3

FY23

50.1

FY24

61.1

FY25E

69.7

FY26E

79.8

FY27E

Source: Company; MOFSL

Exhibit 22: We expect consumer durables’ operating EBITDA to reach 7.8% by FY27

8.8

7.8

6.2

6.1

Consumer Durables (INR b)

7.0

Op EBITDA margin (%)

7.3

7.6

7.8

1.8

2.4

2.0

3.3

3.5

4.5

5.3

6.2

FY18

FY20

FY22

FY23

FY24

FY25E

FY26E

FY27E

Source: Company; MOFSL

August 2024

Amber Enterprises

Amber 2.0 – Focusing on the high-growth electronics

business

Amber's electronics division has undergone significant expansion, diversifying its portfolio

beyond consumer durables through strategic acquisitions such as Ascent. This strategy

enabled its entry into telecom, hearable & wearable, and EV space applications.

Amber, though its subsidiaries, is a market leader in manufacturing PCBAs for the

consumer durable sector, providing 25% of total market demand. It has a proven

track record and extensive experience in providing solutions for home appliances,

RAC market, and the telecom sector. In FY23, it expanded its customer base in

electronics division and ventured into manufacturing cutting-edge applications such

as smart wearables and hearables. Additionally, it introduced new products for

telecom equipment like ONT and RRH. With the electronics market evolving towards

smarter products, the demand for PCBAs is expected to surge, thus strengthening

the division's position further.

Key strategies to grow the electronics division

JV with Noise for hearables and wearables

During 2QFY24, Amber entered into a JV with Nexxbase Marketing Private Limited,

having its brand ‘Noise’, to undertake the manufacturing, assembling, and designing

of wearables and other smart electronic products. The company is setting up a plant

in Noida for manufacturing the wearables and electronics products. The plant is set

to commence from 1QFY25. ILJIN was already present in wearables. In FY23, ILJIN's

revenue stood at INR8,804m, reporting a CAGR of 21% over FY18-23.

Entry into PCB manufacturing via Ascent acquisition and MoU with Korea

Circuit

Amber is expanding its presence from PCB assembly to manufacturing bare board

PCB through acquisition of Ascent Circuits, thereby catering to a wide range of

market segments such as aerospace & defense, railways, industrials, telecom,

automobile, healthcare, hearables & wearables, and consumer durables. Amber's

growth strategy extends beyond revenue diversification, with plans for backward

integration into component manufacturing, particularly in the electronics PCBA

space. It has also signed an MoU with Korea Circuits through Ascent Circuits to

manufacture Flex, HDI, and Semiconductor substrate PCBs, thereby fortifying PCB

manufacturing in India. Ascent Circuits generates high double-digit margin, has NWC

days of 100, and enjoys mid-teens RoE/RoCE. The integration of Ascent Circuits will

result in improved margins for Amber. We thus expect the electronics division

revenue to clock a CAGR of 33% over FY24-27, with EBITDA margin improving to

8.2% by FY27E from 5.6% in FY24.

August 2024

Amber Enterprises

Outlook for the electronics business

Amber aims to achieve a more balanced revenue mix in the electronics business,

with increased penetration in smart watches, automobiles, IT & Telecom,

Agriculture, and Energy segments (28% contribution in FY24) vs. Consumer Durable

(72% contribution in FY24). By FY25, the company is also targeting to enter into the

defense & aerospace segment.

Going forward, we expect growth in the electronics business to emerge from

increased focus on: 1) margin-accretive sectors – aerospace & defense, railways,

industrials, telecom, automobiles, healthcare, hearables & wearables, and consumer

durables, 2) improved penetration in EV electronics and telecom hardware, and 3)

increased backward integration in the PCB business.

Exhibit 23: Electronics segment’s diversification across the margin-accretive businesses

Source: Company, MOFSL

Exhibit 24: ILJIN – revenue trend

Revenues (INR m)

Growth YoY (%)

8,804

9,134

Exhibit 25: EVER – revenue trend

Revenues (INR m)

2,971

9.1

44.8

Growth YoY (%)

2,969

33.1

2,231

3.4

3,070

3,346

3,247

4,272

3,068

39.2

106.1

1,541

-48.1

3.7

FY24

-3.4

FY19

-3.0

FY20

-5.5

FY21

FY22

FY23

FY20

FY21

FY22

FY23

FY24

Source: Company; MOFSL

August 2024

Amber Enterprises

Exhibit 26: ILJIN – profit margin is weak currently

Net Profit (INR m)

2.6

2.1

1.7

0.5

0.3

Net margin (%)

Exhibit 27: EVER – profit margin is around 3.2%

Net Profit (INR m)

3.8

Net margin (%)

3.8

3.2

1.3

1.1

0.9

FY18

FY19

FY20

FY21

FY22

114

FY23

FY24

FY20

0.6

FY21

FY22

112

FY23

FY24

Exhibit 28: Ascent – revenue clocked a 11% CAGR over FY19-

Revenues

Growth YoY (%)

50.5

15.2

-4.9

-17.1

1,572

FY19

1,303

FY20

1,502

FY21

2,261

FY22

2,785

FY23

2,632

FY24

23.2

Exhibit 29: Ascent – EBITDA margin in mid-teens and hence,

can provide a margin boost to Amber

EBITDA

EBITDA margin (%)

18.9

527

13.4

13.3

-5.5

5.1

FY19

6.2

202

FY20

FY21

301

FY22

FY23

Exhibit 30: Ascent RoE/RoCE improved in last two years (%)

RoE

RoCE

17.5

14.4

10.5

Exhibit 31: Ascent – Asset turnover ratio improving (x)

Asset Turnover ratio

3.1

2.4

3.1

8.7

6.8

3.1

5.4

2.8

0.6

FY20

FY21

FY22

FY23

FY19

1.6

1.5

1.6

FY19

FY20

FY21

FY22

FY23

Exhibit 32: Electronics segment revenue to improve (INRb)

Electronics

81.2

34.9

41.0

5.4

50.0

25.0

Growth YoY (%)

Exhibit 33: Electronics segment EBITDA improving

Electronics Division (INR b)

Op EBITDA margin (%)

7.7

5.9

4.3

4.0

4.3

5.6

1.4

0.7

FY24

FY25E FY26E FY27E

Source: Company; MOFSL

8.2

1.9

8.2

2.4

-27.3

6.3

4.6

6.5

11.8

12.4

18.6

23.3

29.1

0.1

FY18

0.3

FY20

0.3

FY22

0.5

FY23

FY20

FY21

FY22

FY23

FY24 FY25E FY26E FY27E

Source: Company; MOFSL

August 2024

Amber Enterprises

Amber 3.0 – Anticipating growth from the Railways and

Mobility businesses

Amber acquired Sidwal in 2019 to expand its offerings in mobility AC solutions. Sidwal is

the largest supplier of roof-mounted package unit ACs. It caters to the segments like

Railways, Bus, Metro, Defense, and Telecom & IT. Its key clients include Indian Railways,

BEML, Siemens, DMRC, CAF, et al. The company offers a diverse range of mobility

products, including roof-mounted ACs for Mainline Coaches, AC & refrigeration solutions

for railways, roof-mounted loco drivers’ cab AC, metros, and other HVAC products.

Key strategies to grow the mobility division

Targeting wider offerings in railways

Sidwal is now targeting to capture a larger wallet share in the railways segment. It is

aiming to garner 18-20% of the overall cost of a coach with its entry into newer

areas. According to industry sources, nearly 35% of the overall costing of Vande

Bharat coaches comes from ancillaries such as turnkey systems, seats, gangways,

vacuum evacuation systems, and miscellaneous items. Besides, as per Indian

Railways plan, the awarding is yet to happen for 100 aluminum train-sets with

distributed power system and 100 aluminum train-sets with concentrated power

system. These will also be followed by more tenders for Vande Bharat trains.

Currently, due to changes in government strategies in Indian Railways, certain metro

and Vande bharat related projects are delayed thereby impacting performance of

this segment for Amber.

Exhibit 34: BoM breakup for a Vande Bharat train with key players present in each category

Component

Propulsion system including traction

converters, brake chopper resistors, traction

motor, transformers, auxiliary converters,

pantographs, RMPU's, lighting, assembled

bogies

Complete shell kit per coach

Turnkey furnishing

Seat - Economy class

Seat - Executive class

Vacuum evacuation system

Brake system

Nose Cone

Gangway

Misc- Mechanical

Misc - Electrical

Total

Basic unit rate

(INR m)

Quantity

Total

(INR m)

Key players

500.0

500



Medha, Alstom, Siemens, BHEL, Titagarh, CG

Power

3.5

5.0

6.0

2.5

5.0

1.0

2.0

2.5

916



DTL, Pennar, Airflow, Universal, Chennai

Radha, EC Blades

BFG, MSL, HFL, Kineco, Airflow

Ster, Tata, Airflow, Advanced Silicones

EVAC, Glova, Oasis

Knorr Bremse, Wabtec

BFG, MSL, HFL, Kineco, Airflow

Hubner, Dellner

Several players

Source: Company, MOFSL

August 2024

Amber Enterprises

Technology tie ups by Sidwal for automatic door systems

Sidwal inked Technology License Agreements for Inter-Car Gangways Systems and

Door Systems with Ultimate Group and Rail Systems Limited. Ultimate Group is a

global leader in railway vehicle systems and operates multiple facilities worldwide.

SIDWAL also partnered for Automatic Door Systems, targeting transit.

JV with Titagarh Rail systems

Amber entered into a JV with Titagarh Rail systems to provide comprehensive

integrated solutions to rolling stock manufacturers for railway subsystems in India &

overseas. This JV will invest EUR20m into Titagarh Firema SPA, Italy which in turn

will give a preferred supplier status and right of first refusal for all their products to

Sidwal, Titagarh Rail and their JVs. The strategic partnership in Firema will facilitate

Sidwal’s entry into the European market/global play. This will also provide Sidwal

with a preferred access to Firema’s own demand. Domestically, this JV not only

increases technical capabilities of Amber to address a larger portion of BoM of a

train coach but also enables its entry into subsystems for the fast-growing railway

segment in India (particularly for upcoming Vande Bharat as well as metro trains).

The alliance with Titagarh aims to boost Sidwal's wallet share per coach to INR20m,

covering 30% of BoM in the next two to three years, and expanding offerings to

interiors, gangways, seats, and more. SIDWAL is set to supply components for

projects such as Vande Bharat Express and metro coaches, serving customers like

BEML, Alstom, CRRC, and Titagarh.

Exhibit 35: Titagarh and Sidwal tie-up

Source: Company, MOFSL

August 2024

Amber Enterprises

Key developments for the railway division in FY24



In FY24, the division received its first order for doors and gangways from three

new customers. The order value was INR5.15b, with total order book at INR20b

in FY24. Sidwal plans to assemble new products in Phase 1 and commence

complete manufacturing from 1QFY26 for new customer orders.

The company’s defense portfolio is gaining momentum, with double-digit

growth in the order book in FY24 (to INR500-600m from INR200-225m earlier).

It plans to expand its product portfolio for specialized terrain vehicles and slip-

on AC units.

For the new product business, the company expects higher growth and margins,

with clearances and approvals anticipated in FY26, and production expected to

commence by 4QFY26. According to management, Sidwal now addresses

INR11m per passenger car, thereby expanding its addressable market.

Management projects FY25 to be a year of execution and customer approvals

for new products, with real ramp-up starting from 2HFY26. This coincides with

the rolling out of new Vande Bharat trains (sleeper class with 24 coaches in each

train). Management anticipates healthy growth outlook for Sidwal, with

expectations of increased train rollouts from FY26, and FY27 projected as the

peak year for trains. We expect FY25 to remain weak due to delays in certain

orders from Indian Railways.

The company expect margins to remain in the 20% range, with HVAC margins

being consistent, doors and gangways at 18%, and couplers at 18-19%.

Capex for the mobility segment

Sidwal plans to incur a capex of INR2.0-2.25b over the next two years, particularly,

for expanding in railways subsystems across a greenfield facility in Faridabad and

two facilities in an SPV.

We thus expect the mobility segment to start growing post FY25 for Amber after its

initial capex for expanding across subsystems. We expect revenue for mobility

segment to record a CAGR of 30% over FY24-27, respectively.

Exhibit 36: Railway & Mobility segment revenue

Railway Sub-systems & Mobility

Growth YoY (%)

87.2

28.3

Exhibit 37: Railway & Mobility segment operating EBITDA

Railway Sub-systems & Mobility division (INR b)

Op EBITDA margin (%)

43.8

15.5

14.3

2.7

4.9

9.2

10.5

0.6

FY20

23.2

23.8

20.4

21.5

22.2

1.4

2.0

2.9

4.2

4.8

0.7

FY22

1.0

FY23

1.0

FY24

1.1

FY25E

2.0

FY26E

2.3

FY27E

FY21

FY22

FY23

FY24

FY25E

FY26E

FY27E

Source: Company; MOFSL

August 2024

Amber Enterprises

Exhibit 38: Sidwal’s share strategically increasing across the railway business

Source: Company, MOFSL

August 2024

Amber Enterprises

Financial outlook

We expect Amber’s revenue/EBITDA/adj. PAT to clock a CAGR of 21%/25%/51%

over FY24-27. We project its revenue mix to start improving for the other segments,

such as electronics and mobility, over the next few years as the company enters into

newer segments. We will continue to monitor the continuous investments from

Amber to expand the electronic segment as well as railways. Over the last two years,

Amber invested in capex to build the component ecosystem for RAC division. It will

be investing in electronics and railways divisions. We expect margins in the near

term to remain weak due to large capacity additions by OEM and ODM players in

the AC segment. However, with improving non-AC component volumes and Sidwal’s

revenue, we expect a gradual uptick in margins. We expect the return ratios to be

affected in the near term due to incremental capex, but anticipate its RoE/RoCE to

improve from FY26 onwards.

Exhibit 39: Segmental revenue and EBITDA

Y/E March (INR m)

Segmental revenue

Consumer Durables Division

Growth YoY (%)

Electronics Division

Growth YoY (%)

Railway Sub-systems & Mobility division

Growth YoY (%)

Total Revenues

Growth YoY (%)

Operating EBITDA

Consumer Durables Division

Margin (%)

Electronics Division

Margin (%)

Railway Sub-systems & Mobility division

Margin (%)

Total Operating EBITDA

Margin (%)

Other adjustments

EBITDA

Margin (%)

2,030

6.2

260

4.0

670

23.2

2,960

7.0

206

2,754

6.5

3,260

6.1

510

4.3

990

23.8

4,760

6.9

581

4,179

6.0

3,520

7.0

690

5.6

980

20.4

5,190

7.7

271

4,919

7.3

4,476

7.3

1,426

7.7

1,060

21.5

6,962

8.2

702

6,260

7.4

5,284

7.6

1,899

8.2

2,050

22.2

9,233

9.0

867

8,366

8.2

6,204

7.8

2,373

8.2

2,342

22.2

10,920

9.1

1,031

9,889

8.3

32,680

38.0

6,500

41.0

2,890

43.8

42,070

38.8

53,339

63.2

11,776

81.2

4,156

43.8

69,271

64.7

50,083

-6.1

12,410

5.4

4,800

15.5

67,293

-2.9

61,074

21.9

18,615

50.0

4,928

2.7

84,618

25.7

69,730

14.2

23,269

25.0

9,227

87.2

1,02,226

20.8

79,762

14.4

29,086

25.0

10,542

14.3

1,19,390

16.8

FY22

FY23

FY24

FY25E

FY26E

FY27E

Source: Company, MOFSL

August 2024

Amber Enterprises

Exhibit 40: We expect Amber’s revenue to post a CAGR of

21% over FY24-27

Revenue (INR b)

64.7%

44.0%

29.3%

38.8%

25.7% 20.8%

16.8%

-2.9%

30.3

27.5

FY19

39.6

FY20

-23.5%

FY21

42.1

FY22

69.3

FY23

67.3

84.6 102.2 119.4

YoY%

Exhibit 41: We expect the share of non-AC revenue to move

up from the current levels

RAC & Components (%)

17.1

21.0

21.8

22.3

23.0

Non-AC (%)

25.6

27.8

31.8

33.2

82.9

79.0

78.2

77.7

77.0

74.4

72.2

68.2

66.8

FY24 FY25E FY26E FY27E

Source: Company; MOFSL

FY19 FY20 FY21 FY22 FY23 FY24 FY25E FY26E FY27E

Source: Company; MOFSL

Exhibit 42: Amber’s EBITDA margin to inch up on improved

revenue from higher-margin segments

EBITDA (INR b)

7.7

7.8

7.3

EBITDA margin (%)

7.4

8.2

Exhibit 43: We expect its PAT to clock a CAGR of 51% over

FY24-27

Adjusted PAT (INR B)

Adjusted PAT margin (%)

3.5

2.7

2.6

2.3

2.0

2.7

3.8

8.3

3.4

4.0

6.5

6.0

2.1

FY19

3.1

FY20

2.2

FY21

2.8

FY22

4.2

FY23

4.9

6.3

8.4

9.9

0.9

FY19

1.6

FY20

0.8

FY21

1.1

FY22

1.6

FY23

1.3

2.3

3.5

4.6

FY24 FY25E FY26E FY27E

Exhibit 44: We expect net debt to remain high over the next

two years on increased capex

Net Debt (INR b)

0.3x

0.2x

0.1x

0.0x

1.9

FY19

2.0

FY20

-0.5

FY21

2.4

FY22

5.9

FY23

5.2

8.8

7.3

4.5

Net debt to Equity ratio (x)

0.4x

0.3x

0.1x

Exhibit 45: We expect RoE & RoCE to reach double-digit

levels from FY26 onwards

RoE (%)

15.0

10.0

15.0 6.0

10.1

6.6

FY19

FY20

FY21

6.1

FY22

6.5

8.2

10.5

8.6

6.7

7.8

9.8

RoCE (%)

14.3

15.9

12.1

13.4

FY24 FY25E FY26E FY27E

FY23

FY24 FY25E FY26E FY27E

August 2024

Amber Enterprises

Exhibit 46: We expect FCF to improve from FY25 as capex

moderates

OCF (INR b)

FCF (INR b)

Exhibit 47: NWC cycle has remained comfortable for the

company and we expect similar trend in future

Working capital (days)

Exhibit 48: With improved product mix, we expect asset turnover ratio to improve

Asset turnover (x)

3.3

2.9

2.2

2.6

3.2

2.4

2.5

2.8

2.9

FY19

FY20

FY21

FY22

FY23

FY24

FY25E

FY26E

FY27E

Source: Company; MOFSL

August 2024

Amber Enterprises

Valuation and recommendation

The stock is currently trading at 60.7x/39.3x P/E on FY25/26E earnings. We initiate

coverage on Amber with a

BUY

rating and a DCF-based TP of INR5,000 implying 42x

P/E on a two-year forward EPS (Sep’26). Our assumptions take into account 20-year

revenue CAGR of 12% and EBITDA CAGR of 13%, asset turnover of 3.5-4x over the

same period. We bake in WACC of 10.6% and terminal growth rate of 5%.

Exhibit 49: Bear /Base/ Bull case scenario

Assumptions

Target price

Bear case

Higher WACC 11%,

Terminal growth rate 3%

3,850

Base case

WACC of 10.6% and

Terminal growth rate 5%

5,000

Bull case

Lower WACC 10.2%

Terminal growth rate 6%

6,400

Rationale



We take sensitivity in DCF

assumptions

August 2024

Amber Enterprises

Company profile

Established in 1990, Amber is a leading backward-integrated player in India's RAC

industry, commanding a significant market share. The company operates across

components and FG segments in the HVAC industry, offering a diverse product

portfolio, which includes RACs, critical components, and mobility applications for

various sectors such as railways, metros, buses, and defense. With 27 modern

manufacturing facilities strategically located across India, Amber ensures quick

turnaround time for its customers. Its strong backward integration and robust R&D

capabilities position it favorably in the ODM sector. Amber has continuously added

capabilities across segments via either capex or inorganic acquisitions over the years

to capture the larger value chain.

Segment and product portfolios

Over time, Amber has broadened its business scope through backward integration

and acquisitions, extending its product range across multiple segments. Its RAC

division contributed 72% of revenue in 2018, which decreased to 38% by 3QF24.

This decline mirrors the company's expansion into electronics, railway subsystems,

and the mobility divisions.

Exhibit 50: Segment portfolio

Source: Company, MOFSL

August 2024

Amber Enterprises

Exhibit 51: Product portfolio

Source: Company, MOFSL

Key business segments:

RAC & Components:

Amber specializes in designing and manufacturing Room Air

Conditioner (RAC) systems, including Indoor Units (IDU), Window ACs (WDU), and

Outdoor Units (ODU) for Split ACs ranging from 0.75 ton to 2.0 ton. The company’s

product range includes various energy ratings and refrigerant types, offering fixed

speed and Inverter AC models. In FY23, Amber expanded its customer base and

product portfolio by introducing commercial ductable and cassette ACs, thus

enhancing its ability to meet diverse customer needs in the commercial RAC

segment. Amber's manufacturing expertise extends to functional components for

ACs such as heat exchangers, motors, controllers, fans, and condensers, as well as

sheet metal components, copper tubing components, and injection molding parts.

Additionally, the company manufactures components for consumer durable goods

and automobiles, covering multiple product categories. Currently, Amber covers

70% of the total value chain of IDU and ODU for Inverter SACs.

Electronics (ILJIN, EVER & Ascent):

Amber, through its subsidiaries, is a market

leader in manufacturing PCBAs for the consumer durable sector, with a proven track

record and extensive experience in home appliances, RAC, and Telecom sectors. In

FY23, it expanded its customer base in this division and ventured into manufacturing

Smart Wearables and Hearables products. Additionally, it introduced new products

for telecom equipment such as ONT and RRH. With the electronics market moving

towards smarter products, the demand for PCBAs is expected to improve, further

solidifying the division's position.

August 2024

Amber Enterprises

Railway Subsystems & Mobility division:

Amber acquired Sidwal in 2019 to expand

its offerings in mobility AC solutions. Sidwal is the largest supplier of roof-mounted

package unit ACs. It caters to the segments like Railways, Bus, Metro, Defense, and

Telecom & IT. Its key clients include Indian Railways, BEML, Siemens, DMRC, CAF, et

al. The company offers a diverse range of mobility products, including roof-mounted

ACs for Mainline Coaches, AC & refrigeration solutions for railways, roof-mounted

loco drivers’ cab AC, metros, and other HVAC products. Additionally, the company

has carried out new product innovations across industries and provided Air

Conditioning solutions to Metro Line Coaches. It has also secured significant

contracts for metro AC projects.

August 2024

Amber Enterprises

Key risks: Slowdown in the industry, input price volatility

Amber’s performance is subject to the following risks associated with:



Shifting of in-house production by OEMs:

The OEM players are shifting towards

in-house production and assembly in the RAC industry, which could adversely

affect ODM players (like Amber).

Competitive intensity:

The RAC industry faces intense competition owing to

rapid capacity expansion by all players led by PLI incentives, which could lead to

demand-supply mismatch. This could eventually result in loss of market share

for Amber.

Seasonal variations:

Demand for ACs is highly seasonal, with peak demand

visible during the summer months. The manufacturers and retailers may face

challenges in managing inventories and cash flows during off-peak seasons.

Market demand fluctuations:

Changes in consumer preferences, economic

conditions, and/or technological advancements can lead to fluctuations in

demand for RAC units, PCBA, and railway subsystems. The fluctuations pose a

risk of overstocking or understocking, thereby adversely impacting profitability.

Volatility in raw material prices:

Persistent high commodity prices present

enduring obstacles for the company's ODM business, necessitating careful

management of raw material procurement risks.

Environmental concerns:

Growing awareness of environmental issues may lead

to a shift in consumer preferences towards more energy-efficient and

environmentally friendly air conditioning solutions. Companies that fail to adapt

to these changing preferences may face declining sales.



August 2024

Amber Enterprises

SWOT analysis



Market leader in AC ODM

business



Enjoys high wallet share

with key clients



Expanded presence into

high growth electronic

segment for PCB

manufacturing



Expanded offerings in

high margin railways

segment



Continued investment in

building R&D, foreign

player tie-ups and

backward integration



Limitations on

improving realization in

AC ODM segment



Limited bargaining

power with clients



Large upfront capex is

currently required for

scaling up capacities

across segments



‘Make in India’ and

various PLI schemes

provide a strong

addressable market

opportunity for Amber in

the RAC segment



Amber can capitalize on

new growth areas based

on its existing experience

in scaling up segments



Export opportunity across

various segments



Increased competition



Slowdown in industry

growth



Loss of business from

anchor clients



Chip availability and

supply chain issues

August 2024

Amber Enterprises

Management Team

Mr. Jasbir Singh (Chairman & CEO)

Mr. Jasbir Singh has more than 19 years of experience in the RAC manufacturing

sector. He has been serving the Board of Amber since 1

Oct’04. He was appointed

as the Chairman and CEO of the Company w.e.f. 25

Aug’17. He is also the member

of the Audit Committee and Corporate Social Responsibility Committee of Amber.

He holds a Bachelor’s degree in Production Engineering (Industrial Production) from

Karnataka University and Master’s degree in Business Administration from the

University of Hull, UK.

Mr. Daljit Singh (Managing Director)

Mr. Daljit Singh is serving the Board of Amber since 1

Jan’08 and appointed as the

Managing Director w.e.f. 25

Aug’17. He is also the member of the Stakeholder

Relationship Committee and Corporate Social Responsibility Committee of Amber.

He has 17 years’ experience in finance services and 10 years of experience in the

RAC manufacturing sector. He holds a Bachelor’s degree in Electronic Engineering

from Nagpur University and Master’s degree in Information Technology from the

Rochester Institute of Technology.

Mr. Sanjay Arora (CEO – Electronics division)

Mr. Sanjay Arora is the CEO of Electronics Division of Amber. He has been associated

with the company since 23

Jul’12 and has more than 37 years of experience in the

manufacturing industry. He is responsible for the Electronics Division of Amber

(currently comprising ILJIN Electronics and EVER Electronics). He is also responsible

for innovation, security, and legal matters of the company. He holds a degree in

Electrical Engineering with specialization in Electronics and Television Technology

from the YMCA Institute of Engineering, Faridabad.

Mr. Udaiveer Singh (CEO – Mobility Division)

Mr. Udaiveer Singh has been associated with the company since 15

Dec’03 and has

over 26 years of experience in the manufacturing industry. He is also serving as the

Managing Director of Sidwal Refrigeration Industries Private Limited, a wholly

owned subsidiary of Amber. He is responsible for the planning and operations of the

RAC manufacturing facilities of Amber. He holds a Diploma in Mechanical

Engineering from the Board of Technical Education U.P.

Mr. Sachin Gupta (CEO – RAC & CAC Division)

Mr. Sachin Gupta has been associated with the company since 1

Nov’14 and has

over 17 years of experience in the manufacturing industry. He is responsible for

business development in Amber. He holds a Bachelor’s degree in Electrical

Engineering from Punjab Technical University and a Master’s degree in Business

Administration from All India Institute of Management Studies, Chennai.

Mr. Sudhir Goyal (Chief Financial Officer)

Mr. Sudhir Goyal has been associated with the company since 23

Oct’12 and has

over 17 years of experience in the finance function within the manufacturing sector.

He is the head of the finance & accounts department of Amber. He holds a

Bachelor’s degree in Commerce (Hons.) from the University of Delhi. He is an

associate member of the Institute of Chartered Accountants of India.

August 2024

Amber Enterprises

Financials and valuations

Consolidated - Income Statement

Y/E Mar

Total Income from Operations

Change (%)

Raw Materials

Gross Profit

Employee Cost

Other Expenses

Total Expenditure

% of Sales

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income

PBT bef. EO Exp.

EO Items

PBT after EO Exp.

Total Tax

Tax Rate (%)

Minority Interest

Reported PAT

Adjusted PAT

Change (%)

Margin (%)

Consolidated - Balance Sheet

Y/E Mar

Equity Share Capital

Total Reserves

Net Worth

Minority Interest

Total Loans

Deferred Tax Liabilities

Capital Employed

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Goodwill on Consolidation

Capital WIP

Total Investments

Curr. Assets, Loans&Adv.

Inventory

Account Receivables

Cash and Bank Balance

Loans and Advances

Other Current Asset

Curr. Liability & Prov.

Account Payables

Other Current Liabilities

Provisions

Net Current Assets

Appl. of Funds

FY20

39,628

44.0

33,017

6,611

1,063

2,455

36,535

92.2

3,093

7.8

848

2,245

419

1,907

266

13.9

1,584

69.1

4.0

FY21

30,305

-23.5

25,135

5,170

1,021

1,947

28,102

92.7

2,203

7.3

923

1,280

410

331

1,201

369

30.7

816

-48.5

2.7

FY22

42,064

38.8

35,297

6,767

1,500

2,514

39,310

93.5

2,754

6.5

1,079

1,675

464

332

1,543

429

27.8

1,092

33.8

2.6

FY23

69,271

64.7

58,678

10,593

2,116

4,298

65,092

94.0

4,179

6.0

1,391

2,788

1,118

527

2,197

559

25.4

1,572

44.0

2.3

FY24

67,293

-2.9

54,999

12,293

2,572

4,802

62,374

92.7

4,919

7.3

1,865

3,054

1,670

553

1,937

519

26.8

1,352

-14.0

2.0

FY25E

84,618

25.7

69,159

15,458

2,508

6,691

78,358

92.6

6,260

7.4

2,162

4,098

1,584

667

3,181

FY26E

1,02,226

20.8

83,551

18,675

3,029

7,280

93,860

91.8

8,366

8.2

2,405

5,961

1,505

409

4,865

(INR m)

FY27E

1,19,390

16.8

97,579

21,811

3,538

8,383

1,09,501

91.7

9,889

8.3

2,632

7,257

1,512

518

6,263

3,181

814

25.6

2,294

69.6

2.7

4,865

1,245

25.6

3,540

54.3

3.5

6,263

1,603

25.6

4,572

29.1

3.8

(INR m)

FY27E

337

30,712

31,049

758

14,332

1,348

47,487

42,309

15,210

27,099

3,609

908

2,173

64,504

18,808

29,439

7,643

8,546

50,806

39,708

10,713

385

13,698

47,486

FY20

314

10,970

11,284

348

3,205

678

15,515

13,465

3,630

9,836

1,223

118

17,813

6,557

8,542

1,203

293

1,218

13,474

11,058

2,288

128

4,339

15,515

FY21

337

15,704

16,041

365

3,495

769

20,670

14,683

4,466

10,218

1,223

433

1,081

22,892

7,163

10,690

2,899

321

1,818

15,175

13,169

1,864

141

7,717

20,670

FY22

337

17,005

17,342

387

10,318

954

29,001

18,037

5,335

12,702

1,457

1,282

2,254

31,401

8,408

13,149

5,626

4,200

20,095

17,021

2,888

186

11,306

29,001

FY23

337

18,751

19,088

452

13,437

947

33,924

25,621

6,556

19,065

1,425

503

1,934

39,475

10,913

17,631

5,594

5,297

28,478

23,039

5,216

223

10,997

33,924

FY24

337

20,307

20,644

518

14,332

1,348

36,841

31,309

8,333

22,977

3,609

908

2,173

36,236

8,408

15,693

6,913

5,173

29,060

21,671

7,090

300

7,175

36,841

FY25E

337

22,601

22,938

591

14,332

1,348

39,208

35,309

10,398

24,911

3,609

908

2,173

44,427

13,331

20,865

3,395

6,788

36,820

28,143

8,404

273

7,607

39,208

FY26E

337

26,140

26,477

670

14,332

1,348

42,827

38,809

12,696

26,114

3,609

908

2,173

53,913

16,104

25,206

4,882

7,663

43,889

33,999

9,560

330

10,024

42,827

August 2024

Amber Enterprises

Financials and valuations

Ratios

Y/E Mar

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

Dividend Yield (%)

FCF per share

Return Ratios (%)

RoE

RoCE

RoIC

Working Capital Ratios

Fixed Asset Turnover (x)

Asset Turnover (x)

Inventory (Days)

Debtor (Days)

Creditor (Days)

Leverage Ratio (x)

Current Ratio

Interest Cover Ratio

Net Debt/Equity

FY20

50.4

77.3

358.8

3.2

6.4

80.8

52.6

11.3

3.3

42.0

0.1

46.8

15.0

14.7

2.9

2.6

102

1.3

5.4

0.2

FY21

24.2

51.6

476.1

0.0

168.1

78.9

8.5

4.5

62.5

0.0

14.8

6.0

6.6

5.8

2.1

1.5

129

159

1.5

3.1

0.0

FY22

32.4

64.4

514.7

0.0

125.6

63.2

7.9

3.4

51.5

0.0

-49.6

6.5

6.1

6.7

2.3

1.5

114

148

1.6

3.6

0.1

FY23

46.7

87.9

566.5

0.0

87.2

46.3

7.2

2.1

34.7

0.0

-98.8

8.6

8.2

9.1

2.7

2.0

121

1.4

2.5

0.3

FY24

40.1

95.5

612.7

0.0

101.4

42.6

6.6

2.1

29.4

0.0

168.3

6.8

7.8

8.5

2.1

1.8

118

1.2

1.8

0.3

FY25E

68.1

132.3

680.8

0.0

60.7

31.2

6.1

1.8

24.0

0.0

-53.8

10.5

9.8

10.2

2.4

2.2

121

1.2

2.6

0.4

FY26E

105.1

176.4

785.8

0.0

39.3

23.4

5.3

1.5

17.8

0.0

92.8

14.3

12.1

13.1

2.6

2.4

121

1.2

4.0

0.3

FY27E

135.7

213.8

921.5

0.0

30.4

19.3

4.5

1.2

14.7

0.0

131.3

15.9

13.4

15.1

2.8

2.5

121

1.3

4.8

0.1

(INR m)

FY27E

6,263

2,632

1,512

-1,603

-881

7,923

-3,500

4,423

-32

-3,532

-1,512

2,879

4,882

-118

7,643

Consolidated - Cashflow Statement

Y/E Mar

OP/(Loss) before Tax

Depreciation

Interest & Finance Charges

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

Others

CF from Operating incl EO

(Inc)/Dec in FA

Free Cash Flow

(Pur)/Sale of Investments

Others

CF from Investments

Issue of Shares

Inc/(Dec) in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Opening Balance

Other Bank Balances

Closing Balance

FY20

1,907

848

419

-488

2,731

151

2,882

-1,411

1,471

-1,672

-183

-3,266

1,209

-430

-121

-23

634

250

450

503

1,203

FY21

1,201

923

406

-79

-80

2,371

-162

2,210

-1,711

499

-1,568

-1,531

-4,810

3,936

161

-372

-24

3,700

1,099

700

1,100

2,899

FY22

1,543

1,079

464

-539

-62

2,485

-77

2,407

-4,077

-1,670

-1,542

-1,277

-6,896

6,031

-430

-46

5,555

1,066

1,920

2,640

5,626

FY23

2,197

1,391

1,118

-539

-582

3,585

-379

3,206

-6,535

-3,329

210

1,437

-4,888

3,120

-1,097

-96

1,928

246

2,986

2,363

5,594

FY24

1,913

1,865

1,670

-461

5,032

10,019

-371

9,648

-3,977

5,671

788

-7,156

-10,345

589

-1,567

-238

-1,216

-1,913

3,232

5,594

6,913

FY25E

3,181

2,162

1,584

-814

-3,926

2,187

-4,000

-1,813

-23

-4,023

-1,584

-3,420

6,913

-97

3,395

FY26E

4,865

2,405

1,505

-1,245

-904

6,625

-3,500

3,125

-27

-3,527

-1,505

1,593

3,395

-107

4,882

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

August 2024

REPORT GALLERY

RECENT STRATEGY/THEMATIC REPORTS

Amber Enterprises

August 2024

Amber Enterprises

RECENT INITIATING COVERAGE REPORTS

August 2024

Amber Enterprises

Explanation of Investment Rating

Investment Rating

BUY

SELL

NEUTRAL

UNDER REVIEW

NOT RATED

Expected return (over 12-month)

>=15%

< - 10%

< - 10 % to 15%

Rating may undergo a change

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall be within following 30 days take

appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations, is engaged in

the business of providing Stock broking services, Depository participant services & distribution of various financial products. MOFSL is a listed public company, the details in respect of which are available on

www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National

Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for

its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of

Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.

Details of

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other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are

completely independent of the views of the associates of MOFSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware that MOFSL

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service

transactions.

Details

pending

Enquiry

Proceedings

Motilal

Oswal

Financial

Services

Limited

are

available

the

website

https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx

A graph of daily closing prices of securities is available at

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Research Analyst views on Subject Company may vary based on Fundamental research and Technical

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have an independent view with regards to Subject Company for which Research Team have expressed their views.

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professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian

Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.

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The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer,

MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research

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For Singapore

In Singapore, this report is being distributed by Motilal Oswal Capital Markets (Singapore) Pte. Ltd. (“MOCMSPL”) (UEN 201129401Z), which is a holder of a capital markets services license and an exempt

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In respect of any matter arising from or in connection with the research you could contact the following representatives of MOCMSPL. In case of grievances for any of the services rendered by MOCMSPL

write to grievances@motilaloswal.com.

Nainesh Rajani

Email: nainesh.rajani@motilaloswal.com

Contact: (+65) 8328 0276

Specific Disclosures

1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.

2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company

3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months

4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report

5 Research Analyst has not served as director/officer/employee in the subject company

6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months

8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months

9 MOFSL has not received any compensation or other benefits from third party in connection with the research report

10 MOFSL has not engaged in market making activity for the subject company

********************************************************************************************************************************

The associates of MOFSL may have:

- financial interest in the subject company

- actual/beneficial ownership of 1% or more securities in the subject company at the end of the month immediately preceding the date of publication of the Research Report or date of the public

appearance.

- received compensation/other benefits from the subject company in the past 12 months

- any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific

recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an

inherent conflict of interest in some of the stocks mentioned in the research report.

- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

August 2024

Amber Enterprises

be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act

as an advisor or lender/borrower to such company(ies)

received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.

Served subject company as its clients during twelve months preceding the date of distribution of the research report.

The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report

Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider demat accounts

which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not considered in above disclosures.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is,

or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

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believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All

such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or

subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not

treat recipients as customers by virtue of their receiving this report.

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The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to

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be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not

suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures

of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject

to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its

associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document.

They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as

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Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

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August 2024