Amber Enterprises IPO recommendations: Analysts positive

On the busy IPO street in India, one more mainboard public offer opened today in the form of Amber Enterprises. The Gurgaon-based company has impressed brokerage houses and analysts with its financial performance. This is the reason most Amber Enterprises IPO recommendations are positive. Priced in the range of INR855 – 859 per share, the IPO aims to raise up to INR600 crore (INR6 billion). Here is a quick snapshot of Amber Enterprises IPO recommendations by major brokerage houses.

Angel Broking has put a subscribe rating on the IPO. “At the upper end of the price band, the P/E multiple works out be 80x (pre issue equity base) of FY17 EPS which prima-facie looks on the higher side. However, considering future earnings growth trajectory to be very robust (FY19 earnings expected to be 4x of FY17 earnings); we feel that the stock would trade at ~22-25x (post issue equity base) on our rough EPS for FY2020 which looks very attractive. Its closest peer – Dixon Technologies is trading at higher valuation of 30x FY20 earnings. We recommend ‘SUBSCRIBE’ on the issue for a mid-to-long term period,” said the brokerage house in its research report.

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Hem Securities has also outlined bullishness in Amber Enterprises IPO recommendations. “The company is bringing the issue at P/E multiple of 49 on annualized H1FY18 EPS at higher price band of Rs 855-859/share. Co being market leader in RAC OEM/ODM industry in India have reputed clientele with strong track record of financial performance. Looking after strong future prospects of co with decent fundamentals, we recommend “Subscribe” on issue,” noted its IPO note.

ICICIdirect feels the company is fairly valued but outlook looks attractive. “Though at the higher end of the IPO price band of INR859, the stock is fairly valued. However, the future performance of the company looks attractive considering strong demand for white goods products in India. AEL is the market leader in the RAC ODM/OEM industry in India with a volume market share of 55.4% in FY17. Strong growth prospect of RAC industry in India, strong clientele base (commands ~75% market share of total RAC market in India), coupled with an increase in plant utilisation and improvement in return ratios (post IPO company will be debt free) provide sufficient margin of safety at the higher end of the subscription price,” said the broker report.

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Choice Broking also has a positive view on the IPO but has advised caution as valuations appear stretched. “On valuation front, Amber is demanding a P/E valuation of 96.8x as compared to peer average of 62.3x. Moreover, with respect to FY18E EPS of Rs. 17, it is demanding a P/E valuation of 50.5x as compared to average FY18E average of 48.2x. Thus we feel that the issue is fully priced. However, considering the growth outlook in the RAC industry and its positioning in the market, we strongly feel that it would create value in long run. Also this is validated from the no divestment from various prominent investors,” said its research note.

It is clear that analysts see value in the company’s business and this is something that we highlighted in our analysis as well. Grey market movement indicates premium and more positive Amber Enterprises IPO recommendations may end up pushing the premium further up. Feel free to participate in a lively discussion about the IPO on this page.