Finance Update

Amber Enterprises gains 2% after analysts see 37-40% upside on Sidwal acquisition

Last Updated : Mar 27, 2019 12:26 PM IST | Source: Moneycontrol.com






Emkay Global, which assumes Rs 230 crore as the deal value, said this acquisition saves lead time for Amber in the HVAC segment and should help it become a preferred supplier for government projects













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Amber Enterprises India shares gained nearly 2 percent intraday on March 27 as brokerage houses said they expect a strong return from the stock after Sidwal acquisition.

The stock was quoting at Rs 793.70, up Rs 12.05, or 1.54 percent on the BSE, at 1135 hours IST.

Emkay Global has maintained its buy call on the stock with price target at Rs 1,072, implying 37 percent potential upside while Edelweiss also retained its buy rating with a target price at Rs 1,100 apiece, implying 40.72 percent potential upside.

Amber, which manufactures Air conditioner and its component, entered into an agreement to acquire 80 percent stake in Sidwal Refrigeration Industries Pvt Ltd.

Sidwal manufactures and sells heating, ventilation, air conditioning, and refrigeration equipment for mobile transport applications. About 70 percent of its revenues come from railways and Metros, 9 percent each from defence and bus ACs.

The deal, valued at around 5.5x-6.5x FY19 EBITDA as per management, is expected to be completed before April 30, 2019.

Emkay Global, which assumes Rs 230 crore as the deal value, said this acquisition saves lead time for Amber in the HVAC segment and should help it become a preferred supplier for government projects.

The higher working capital and the dependence on government projects make it valuation-dilutive, it feels.

The research house said Sidwal will add 18 percent to EBITDA and EPS accretion of 13/8 percent in FY20/21E for Amber.

Edelweiss also said Sidwal acquisition provides exposure to high-growth mobile AC market and the deal is both earnings/RoCE-accretive given Sidwal’s better margins.

“The deal offers comfort given better growth and returns and would improve margin by 80 bps and lead to 12-15 percent jump in FY20 EPS,” it added.

Disclaimer

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The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.


First Published on Mar 27, 2019 12:26 pm



































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Prakash Poojary
Business Analyst

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