Amber Enterprises: Axis Direct explains why this stock should be your pick of the week
Why this share is set to become the next potential summer stock.
Summer has finally set in and the mercury levels are rising as the days go by. But how about your money rises the same way, with this potential stock. Amber Enterprises, a contract manufacturer of air conditioners is set to become the next best summer stock. Not only this company will let you sigh in relief in the scorching heat but also will prove to be a money making market this summer.
The air conditioner manufacturer on Wednesday was trading at Rs 831.20 per piece, up by Rs. 2.95 or 0.36%. The stock has grown by 1.20%, after getting an intraday high of Rs 838.20 on Sensex.
Axis Direct has put down the below-mentioned reasons why the air conditioner manufacturer Amber Enterprises should be your next stock to buy this week:
Market leader in domestic RAC, OEM/ODM industry:
Amber is the market leader in the OEM/ODM industry with 55.4% share in volume terms (outsourced market). AEL’s share stands at 19.1% in the overall RAC market in terms of volume. Key customers include Godrej, Bluestar, Daikin, Hitachi, LG, Panasonic, Voltas, Whirlpool and Carrier Midea which together account for 75% of the market share.
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Changing Climatic Conditions:
The increasing trend of warmer summers has necessitated higher cooling requirement in peak summer from March to May onwards. The combined effect of climate change and an evolving El Niño could make 2019 the hottest year ever as per IMD. Given the strong correlation of RAC demand to increases in temperature, the RAC sales are bound to increase as we approach summer.
Recent acquisition to be EPS and RoCE accretive:
Axis Direct believes that Sidwal Refrigeration Industries Pvt Ltd (SRIPL) is a strategic fit in Amber’s portfolio, owing to 1) leadership position in railways (50% share) and metro, 2) supplier of choice for Defence where SRIPL has 80% share, 3) high entry barriers and long approval cycles, 4) diversification into Mobile Transportation Air Conditioning, HVAC etc which are the core business differentiators for Amber. It is expected the acquisition to be EPS and RoCE accretive given asset light, debt light business of Sidwal Refrigeration.
Axis Direct puts a buy call on the stock with a target price of Rs 954. If we take into consideration the current price, then the company is set to rise by nearly 15% in the near term. Hence, let's make your summer exciting by investing in equities.
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