We hereby present you our investment idea for Equity Investment i.e “Pick of the Week”. A thorough analysis of company, industry and economy goes behind our stock ideas for you. With the “Pick of the Week”, you may earn superior returns in stock market over a time horizon of 6 – 9 months.

INVESTING RATIONALE

• 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.

• 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: We believe 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 Defense 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. We expect the acquisition to be EPS and RoCE accretive given asset light, debt light business of Sidwal Refrigeration.

• We have a Buy with a target price of Rs 954.