Amber Enterprises India Limited (AMBER) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q1 FY '27 Earnings Conference Call of Amber Enterprises India Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jasbir Singh, Executive Chairman and CEO and Whole Time Director of Amber Enterprises India Limited. Thank you, and over to you, sir. .

Hello, good morning, and thank you all for joining in the call. On the call today, I'm joined by Mr. Daljit Singh, our Managing Director; Mr. Sachin Gupta, Whole-Time Director; Mr. Sanjay Arora, Whole Time Director of Engine Electronics. Mr. Sudhir Goyal, Group CFO. We have uploaded our presentation on the exchanges, and I hope everyone had an opportunity to go through the same. Let me first briefly talk about the strategic initiatives during this quarter. Firstly, on our manufacturing collaboration agreement with Oppo, laying a strong foundation for the future growth. Our group is reset to foray into mobile phone through a manufacturing collaboration agreement with Oppo Mobile India expanding our presence in the largest segment of the electronics industry. The scope covers 3 brands, Oppo, OnePlus and Realme. I am pleased to update that the initial phase of the collaboration is progressing well through a series of joint working sessions, we are working closely on key priorities and execution milestones. We have also onboarded our Chief Operating Officer for the mobile vertical, bringing along extensive experience and deep expertise from the mobile industry. On time line, we are on course to commence the trial production by quarter 4 of FY '27 and commercial production to begin quarter 1 of FY '28. On the scale front, we expect to begin with around 8 million units in the first year followed by a calibrated phase-wise ramp-up and expect to double to almost about 15 million, 16 million in the second year of operations. To reiterate, -- we view this as a beginning of a longer relationship with Oppo, and we will explore additional avenues of collaboration aligned with the government of India's vision of Atmanirbhar Bharat with a focus on increasing local value addition gradually. Secondly, on the Ascent-K Circuit Expansion front, I'm pleased to share that we recently conducted the groundbreaking ceremony of HDI PCB facility at Jewar near new Noida airport in Uttar Pradesh. The facility will bring together the complementary strengths of Amber Group and Korea Circuit Company to localize the production of HDI PCB which are currently heavily import-dependent leading to greater import substitution as well as creation of employment opportunities in the state of Uttar Pradesh. And the Ascent-K Circuit construction is progressing well for the multilayer PCB facility at Hosur in Tamil Nadu. Switching to performance. Consolidated revenue of Humber grew by 13% year-on-year reaching INR 3,888 crores for the quarter. Operating EBITDA grew by 28% to INR 337 crores and adjusted PAT of INR 126 crores recording growth of 19%. Adjusted PAT is before the exceptional losses. Let me now take you through the divisional performances. Firstly, on the Consumer Durables division. This division reported revenue growth of 8% Y-o-Y basis. Let me emphasize the growth to be viewed in the context of a large base of previous year of Amber in quarter 1. The operating EBITDA grew by 12% despite the cost headwinds from the commodity prices and minimum wage revisions. Looking ahead for the full year, we expect the growth in tandem with the RAC industry growth. Coming to our electronics division. The division reported revenue growth of 29% to touch INR 985 crores. The operating EBITDA more than doubled to INR 107 crores, and margin has expanded to 10.8%. While the journey towards value-oriented business is yielding dividends. However, during the quarter, the Bare printed circuit board business witnessed margin compression amid steep rise in the copper clad laminate cost. Typical of the Bare PCB industry, second-tier suppliers experienced a time lag of around 2 quarters for price pass on. The gradual copper price passed through the customers is underway and progressing very well. On the railway subsystem and division, revenue for the division grew by 18% while the operating EBITDA declined by 26%, largely impacted by product mix, continued commodity inflation, particularly copper along with currency depreciation and minimum wage revisions in Haryana. For the full year, we expect this division to deliver growth of about 30% to 35% for the full year as informed earlier. On the expansion front, Sidwal's greenfield facility of heating ventilation air conditioners, pantry, doors and gangways in Faridabad is now operational positioning us well for scalable growth and business expansion. Overall, on the margin, let me reiterate the business continue to face pressure from elevated commodity prices, currency depreciation and minimum wage revision and expect this to persist through H1 which is temporary in nature and expect to normalize as macro environment improves. Now let me hand over to Sudhir Goyal, our CFO, for the financial highlights.

Hi. Good morning, everyone. And now let me take you through the consolidated financial highlights. Revenue for quarter 1 financial year '27 increased to INR 3,888 crores compared to INR 3,449 crores in the same quarter previous year, recording a growth of 13%. Operating EBITDA for the quarter increased to INR 337 crores against INR 263 crores in quarter 1 financial year '27, reflecting a growth of 28% year-on-year. For clarification, operating EBITDA is before impact of ESOP expenses, other nonoperating income and expenses. And quarter 1 financial year '27, operating EBITDA is after adjusting for the consumption of inventory that had been fair valued at the time of purchase price allocation for the new acquisitions, with PowerOne, Unitronics, and Shogini, aggregating to an impact of INR 15.35 crores, representing increase in raw material consumption in the consolidated financial statements. So this is a nonoperating nature of our raw material consumption, expansion in the consolidated financials. Adjusted PAT for the quarter stood at INR 126 crores against PAT of INR 106 crores in quarter 1 financial year '26. This adjusted PAT of INR 126 crores also has an impact of INR 15.35 crores. If we add back that, this will further increase to INR 141 crores. Adjusted PAT of quarter 1 financial yeaer '27 is before the exceptional loss of INR 123 crores. Now let me take you through the divisional performance overview. Firstly, the revenue and operating EBITDA details of our divisional performance are not comparable with the published segmental results. Starting with the Consumer Durable division, the consumer durable division reported revenue of INR 2,758 crores for the quarter compared to INR 2,560 crores in quarter 1 financial year '26 reflecting a growth of 8% year-on-year. Operating EBITDA for the quarter increased by 12% year-on-year to INR 214 crores compared to INR 192 crores in previous year. Coming to the electronic division performance, revenue for the quarter increased to INR 985 crores compared to INR 766 crores in quarter 1 financial year '26, reflecting a strong growth of 29% year-on-year. Operating EBITDA for the quarter recorded a growth of 117% year-on-year and stood at INR 107 crores compared to INR 49 crores in the previous year. Moving to railway subsystem and defense divisional performance. The revenue for the quarter increased to INR 144 crores compared to INR 123 crores in quarter 1 financial year '26, reflecting a growth of 18% year-on-year. Operating EBITDA for the quarter got impacted by the product mix commodity inflation, minimum wage revision and resulting decline of 26% against previous year from INR 22 crores to INR 16 crores. The division is expected to deliver 30% to 35% revenue growth in financial year '27. Thank you. And now I request the operator to please open the floor for Q&A.

[Operator Instructions] The first question is from the line of [ Santosh Seshadri ] from Avendus Spark.

So my first question is on the mobile business and the export opportunity. Can you give us some color on any discussion with OEMs around this export opportunity and potentially tapping in the benefits of PLI. And also if you could walk us through the eligibility criteria for your business and whether you qualify for the same .

Well, Santosh, on the mobile business because we have yet to start from January. So we want to do a gradual ramp-up because this is a new segment we are adding up. Yes, we have -- we are in discussion with them about the export opportunities, and they are also excited about it. But it's too early for us to comment because we want to first go and launch this product category as a new product category for Amber, which we will be starting from almost about quarter 4, mid of quarter 4, somewhere and then commercial production has to start from 1 of April. But moving ahead, I think once we are -- we complete 1 year of our first domestic production, then we may think about the export opportunities.

And on the second part of the question, would be eligible for this PLI given our HDI PCB expansions. .

So yes, all the -- there are 3 approvals which we have received on the ECM scheme on the HDI PCB part. One is for INR 3,200 crores in Jewar Airport then about INR 1,000 crores in Hosur and INR 500 crores in Shogini Pune. So all 3 assets...

Sorry to interrupt. So just on the PLI benefits related to backward integration in the mobile, are we eligible for that given that we are also expanding .

Draft guidelines are yet to come. Let the draft guidelines come, then we will be able to comment or answer to your questions.

Okay. And on my second question, just on the PCB business. Can you give us some color on the pricing structure here? Are there any fixed price contracts? I just like what proportion of the business is under fixed price contracts and when does that come up for renewal? .

No, there's -- we are a B2B company, Santosh. We pass on currency and commodity issues to the customers. In Amber, we can do it in quarter lag because we are Tier 1. At PCB, we are Tier 2. So there is a quarter lag -- there are 2 quarter lags. But what we have seen in July is that the -- there are some customers who have increased the cost. So our margins are coming back to where it was. Let us hope that both Shogini and Ascent will be able to get it. But the -- I want to tell you that copper clad laminate is -- the prices continue to increase. So getting price revisions from customer has become a regular kind of an event for us. It will keep on increasing because of artificial intelligence and data center requirements and there's a lot of shortage of copper clad laminate also. So there's a strategic inventory positioning also happening. But we are able to pass on the customers all the price increase we have.

Any color on the quantum of increase.

Mr. Seshadri, may we request you to turn to the question queue for a follow-up. The next question is from the line of Aditya Bhartia from Investec. .

My first question is. First question is on the margins that we recorded. So in this quarter, pretty much we haven't really seen any impact of raw material inflation or of rupee depreciation, at least on the consumerable part of it. So how should we see it as we go forward? Was there any benefit of inventory that we may have been carrying? And how is the outlook for margins looking like?

I think it's a mix of a couple of things. I'll allow Sachin to answer your question, Aditya.

Actually, what has happened because everyone knew that deliver the QCO enforcement for the compressors and copper IGT. So there was a lot of stocking that was happening. So obviously, that stocking of the compressors and copper has helped us to secure, I would say, the rate at a better price. This was the 1 part. The second part was that. So whatever products probably we have made in this quarter were majorly driven by the premium side. So whatever products we have made are majorly on the 5-star category and the 2 turn category. So because of that, the realization of the margins are better. But every quarter, this mix keeps on changing. I think the better is to see on an annualized basis. So on an annualized basis, I think so we should be in line to our projections only. It's not like that, the margins in this quarter will be reflecting in the complete year outlook. .

Sure, sure. And when you mentioned that in H1, we are likely to be seeing some margin compression. What kind of an extent are we looking at? .

No. So we are not looking at any margin compression. What I'm saying is that the improvement in the margins for this particular quarter should not reflect as an image for an outlook for the complete year because this particular quarter, we had seen 2 benefits. One is the restocking of the compressor and copper. Second is there the production mix in this quarter, we could see from our data, the major demand was for the premium product category. .

Understood. Understood. That's helpful. My second question is on -- some of the disruptions that you have seen on the agent side, the unfortunate incident that happened. Is it something that is impacting production or things are going smoothly over there? .

Aditya, basically, we have received permission to reconstruct the facility just yesterday from the department. So the assessment is undergoing. And we will intimate the exchanges. But let me just tell everybody on the call that the guided number of what we did last quarter, we are hopeful that we should be in line to deliver despite of this disruption.

[Operator Instructions] The next question is from the line of Dhruv Jain from Ambit Capital. .

My first question is on the Electronics division. So while you have reported about 29% revenue growth, if I kind of strip out the acquisition benefit it is not there in the previous quarter, the growth seems lower -- so if you could just tell us why is that the case? And how should we look at the guidance of FY '27 for the division for both margins and top line? That's my first question. .

Sanjay, will you take this question? .

Yes, Am I clear? Can you hear me?

Yes.

So actually, what has happened is that in the EMS segment, like just to give you clarity, we have 3 segments in Electronics division now. One is EMS segment. The other is the PCB segment. And the third, we categorize as industrial and Automation segment. So in the EMS segment, yes, the growth compared to last quarter -- last year same quarter got a little standard. The main causes have been that our customers who are in the consumer durables segment, they were carrying quite a lot of inventory. And so the order book got reduced. Then some of the customers, they have shifted from sales to job work kind of categories. So obviously, the revenue got impacted because of that. The energy segment, that is the smart meter segment, de-grew the smartwatch segment also de-grew. Apart from this, let me assure you that our full year guidance for the EMS segment, whatever we gave still remains intact. We are quite confident we will achieve that. .

Thanks, are very clear. Sir, the second question is on the mobility side. So obviously, we've seen a margin compression because of raw material and labor-related issues. In terms of the order book, right, assuming that's a fixed price sort of an order book, do we see this pressure going forward as well? And how should one think about the sustainable margins in this vertical starting the second half, you mentioned around the first half .

Dhruv, there are 2, 3 factors here. First is in the railway segment, Indian railway segment, these are fixed-price contracts. You can't go to railways and say that my commodity has changed or my currency has changed. So you need to fulfill the tender obligations as you have submitted the tender. Second, apart from the railway, the other businesses like Metro division business, defense business, the bus air conditioning business, the data center air conditioning business, that has a price variation clause. Incidentally, in this quarter, the product mix was such that the first few products, the new products which we are -- which we received the orders have been supplied through principles directly because our factory has just started. So our approvals now are under process. But because we had taken the contracts, the first 2 to 3 trains of each have been supplied directly, which was just a pass on from us. So that has also brought down the margins and because it was just a trading which we did. And second is, of course, the factors of currency and commodity and minimum wage in Haryana, which was shot up by 35% in 1 go. All these factors there. But let me give you the guidance from our side. On the revenue front, 30% to 35% looks doable. And the margins in this financial year we look at around -- in the range of 15% to 16% for this division.

The next question is from the line of Keshav Lahoti from HDFC Securities.

I can see the minority interest have turned negative this time. Why is that sir? .

Yes. So you know that this particular quarter, we acquired additional stake of Ascent circuit . And okay. So essentially, there is no minority, but minority interest has reduced.

I understand.

Come up with the question again. Minority interest has reduced.

We can see earlier minority interest was a quite positive number, what was allocated to the share of non minority shareholder. But this time, this number has turned negative. For example, last quarter, it was INR 28 crores positive number, now it's more like a minus INR 19 crore [indiscernible] swing of INR 50 crores in this number. So why is that so? .

Maybe like I need to check that, that why it has happened. I'll come back to you separately on after this call. .

Understood. And what is the EBITDA margin guidance for the consumer durable business?

So as of now, we are not giving any guidance in terms of percentage because that all depends on the product mix as well as the prices of the commodities and the foreign currency. So it's very difficult to give you any guidance. So we maintain that on the quarterly like basis, we are able to pass on the price hike and the commodity exchange rate difference as well, and we get the margins accordingly.

And then it's a seasonal business also. You don't know how the quarter 4 season will pan out to be. So that's why to guide anything -- any number here will be very, very difficult for us. .

Got it. And last question from my side. As discussed earlier, so how has been [indiscernible] guidance you have maintained for the dividend, but what will be the impact on the business because of this? What sort of impact should we be expecting to do.

Yes. As I explained that we have received a permission just yesterday from the authorities. So today, the work will start, and we'll reassess the complete loss. But let me tell everybody on the call that we are adequately insured. So we don't see any issues on the refurbishment side or extra CapEx, which we'll have to bring in because the building inventory, machines, everything is insured properly. The impact on the business side, we have been able -- because of our multi-geographic location in Elgin, we have been immediately been able to shift businesses to other locations. So we don't see a very big impact, but the exact amount, we will be assessing and we'll let you know within the coming weeks.

The next question is from the line of Sameet Sinha from Macquarie.

Yes. A couple of questions. Just first, I wanted to understand in terms of the increase in input costs and how you pass on to your customer, you explained about in Tier 1, Tier 2. But this is -- obviously, this problem has been around for a while. What I wanted to understand was, if you like, in the third quarter of last September quarter of last year, so you had faced that issue. Is that of higher input cost than we had mentioned [indiscernible] at that time, is the price increase that you put -- how does it -- I mean, do you get the price increase that you asked for in in that quarter, you're getting it now? Or is it -- when the price increases, you get it as of current spot prices? That's my first question, and then I have a follow-up. .

So Sameet, basically in consumer durable, we have 2 types of businesses. One is finished goods and second is components. Then in electronics, we have, again, PCBA, PCB. Different businesses have kind of a different kind of a lag to increase the cost or pass on the cost to the customers. In consumer durable, we are Tier 1. So we are able to pass on a currency change or the commodity changes. Impact of the total of that is passed on, on the next quarter. Just to give it given a little bit brief analysis on this. So supposing we are in middle of the quarter 2 now. The average commodity price and currency price of this quarter will become the base for the next quarter. And when we start beginning to send the invoices in quarter 3 on first date, they will be having the impact of the cost changes either through currency or commodity. The full impact will be reflected in that. That's how the pass-on happens. PCBA also business, same things. the only PCB business is where we are Tier 2, where it requires 2 quarters. So that means the average of this quarter and we will be able to pass on them the cost not from the next quarter, but from the quarter 4 onwards. So that's how in the PCB business happens. I hope I have been able to explain you.

Yes. Definitely. That is very helpful. My second question is, again, relating to these higher input prices. I mean things like CCL, what is the potential for this to be manufactured in India, do you see an opportunity in the next year or 2, we might have some capacity that is localized versus having to import anything? Or we're going to be exposed to these price variations for a number of years.

Sameet there are ,

I mean this [indiscernible] you building a CCL plant, but as a country.

So as a country, we are already -- the first CCL plant is almost operational now, [ Wipro ] So I think they have started meeting the customers. And there are 2 more CCL plants being planned, which we are aware of. But on the other side, Amber is also in discussion at a group level with the prospective JV partners. We will let you know once it matures. But looking at our growth phase for PCB business, this becomes an important backward integration for us to have going forward. And I think by '29, '30, we expect that we should be having our own CCL plants by then.

The next question is from the line of Natasha Jain from PhilipCapital.

Just 1 question. So in terms of consumer durable, you've mentioned that on account of a high base, the growth looks a little moderated. So I just wanted to understand this base would be a normalized base, right, assuming all the customers are going to stick with us for the longer term?

So I'm really sorry, can you repeat the last line? .

Sure. So what I'm wanting to understand is, given consumer durable revenue top line growth is slightly moderated and the reason cited was that it's on a high base. Just wanting to understand this high base will be a normalized base going forward, right? Because these customers would be sticking to us for longer term?

Yes, yes, perfectly. Yes. So this base will be a normalized one. And if you see from last probably, I would say, 4 years, I would say, you can see the pedigree of the customers that we are catering is very, very different. And we have always been addressing this that in market, there are kind of 2 product categories that are operating. One is at an opening price point One is at the high value side. So as a strategy, probably we have always tried to stick on the high-value side and the premium side. And now with the light commercial air conditioning portfolio getting more bigger for us, so obviously, the premiumization of the product or the realization of the product is getting more and more better for us.

Got it, sir. So can I assume that on this base, you mean that you would grow in line with industry, which is assumed to be approximately 15%?

Yes, yes. We are in line with this.

Got it. And sir, one more question. In terms of the festive season, we understand last year, there was a trade confusion in August and now the window for Diwali is a little larger. So are you expecting any strong demand coming off because of -- from AC?

So like last year, this year, again, there is some confusion in the market because from 1st of July, so there is a regulation change in our product category. So the tonnage has to be mentioned on the B level. So earlier in India, you were classifying the product as a 3-star or a 5-star machine, but the tonnage was not mandatory. From 1st of July, the tonnage has got mandatory. Now because of that, what is happening is that in the market, there is a mixed inventory like in a particular category, like 1.5 tonnes, the machines are available from 4,400 watt to 5,200 watt. So what we are expecting is that by Diwali, we are expecting this inventory to be liquidated. Post that, we see that the market to be at equivalized level. And we expect a strong summer starting from November month. So we are not expecting very, very high demand on this coming festive season. This is what looks like now. But obviously, being a seasonal business every month, this can change.

And Natasha, this is not a festivity product. It has shifted to mobiles and smart watches.

The next question is from the line of Nirransh Jain from BNP Paribas.