Shares of Amber Enterprises India Ltd. experienced an 11% jump on Friday, reaching a high of Rs 6,909. This surge followed the company's Q2 FY27 earnings report, which showcased a robust 60% year-on-year increase in consolidated revenue from operations, totaling Rs 2,627 crore.
However, despite the strong top-line growth, brokerage firm UBS expressed concerns regarding the company's profitability. UBS noted that Amber Enterprises' Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) fell short of market estimates, signaling pressure on margins. The company reported an adjusted loss after tax of Rs 57 crore for the quarter, excluding an exceptional loss of Rs 9.5 crore.
UBS Flags Weak Margins and EBITDA Miss
UBS maintained its 'Neutral' rating on Amber Enterprises, setting a 12-month target price of Rs 7,600, which implied an upside potential of approximately 22% from the previous closing price. The brokerage acknowledged that Amber's revenue exceeded both Bloomberg consensus estimates and its own projections by 20% and 24%, respectively.
Conversely, the EBITDA performance was a significant miss, falling below consensus and UBS estimates by 29% and 32% respectively. The EBITDA margin for the quarter stood at 3.7%, a notable decline from 5.5% in the same period last year, and considerably lower than estimates of 6.4% and 6.9%. UBS also reported a net loss of Rs 80 crore, contrasting sharply with consensus and UBS estimates of losses of Rs 14 crore and Rs 3.5 crore, respectively.
Segmental Performance Review
UBS highlighted mixed results across Amber Enterprises' three core business divisions:
- Consumer Durables: This division recorded a 41% year-on-year revenue growth, surpassing UBS estimates by 23%. However, it posted an EBITDA loss of Rs 13.9 crore, contrary to the brokerage's expectation of a profit. UBS attributed this underperformance to factors such as commodity inflation, foreign exchange fluctuations, minimum wage revisions, and ramp-up expenses associated with the new Sri City plant.
- Electronics: The electronics division delivered a stronger performance, with revenue climbing 94% year-on-year and exceeding UBS estimates by 30%. EBITDA for this segment soared by 179% year-on-year, outperforming the brokerage's estimates by 18%. Despite this, its EBITDA margin of 8.4% was still slightly below UBS's estimate of 9.2%.
The overall results indicate a period of strong sales expansion for Amber Enterprises, driven by its diverse segments, but also underscore the ongoing challenges in maintaining profitability amidst various operational and economic pressures.