This contract manufacturer for Voltas, Daikin and LG is betting $1 billion on electronics—will investors stay patient?

What’s driving the surge?

A mix of strong execution and smart strategy. Over the past year, the company has outpaced most of its peers in consumer durables and electronics, while moves such as backward integration and a potential demerger of its electronics arm have stoked investor optimism.

But the rally has also stretched valuations. The stock now trades at a price-to-earnings ratio (PE) of 104x—well above the industry median of 58.3x and even higher than its own 10-year average of 83.2x.

The big question for investors: can Amber keep climbing, and will its diversification bets justify investor expectations?

Let’s find out.

GST cuts to drive short-term boost

In the immediate term, Amber’s revenues are likely to benefit from the recent GST rate cut on consumer durables, lowered from 28% to 18%.

As India’s top contract manufacturer for brands like Voltas, Daikin, LG, Panasonic, and Blue Star, Amber generates nearly three-fourths of its revenue from the consumer durables segment; under which it manufactures room ACs, commercial ACs, and components while electronics (22%) and railway subsystems & defence (4%) make up the rest.

The company in its latest conference call said that inventory numbers are reported to be around 2.5 million to 3 million units, which is almost double the standard inventory (1.4 million to 1.5 million) normally carried by brands due to the poor season.

Jefferies’ preliminary sensitivity analysis indicates that the company's FY27-28 earnings could increase by 4-8% due to volume boost from tax cuts.

Structural tailwinds set to boost scale

Beyond this near-term relief, Amber is positioned to benefit from deeper, structural trends.

Rising urbanisation, higher disposable incomes, easy financing, and climate-driven demand for cooling are expected drive steady demand.

India’s room air-conditioner (RAC) market is projected to expand from 14 million units today to 30 million units by FY30, according to ICICI Direct. As the country’s leading OEM/ODM, Amber is set to capture a large share of this growth.

In electronics, the company is expected to benefit from its foray into high growth verticals such as battery energy storage systems, solar and hybrid inverters, industrial automation, and advanced control systems.

Leveraging these tailwinds, management is targeting $1 billion in revenue from this division within the next three years.

The railway systems and defence division is another strong growth engine, supported by an order book of over ₹2,000 crores and a growing portfolio.

Since acquiring Sidwal Refrigeration in 2019, Amber has expanded into HVAC, pantry, doors, and gangways for rail coaches, while also developing special cooling systems for missile launchers and other defence applications.

Management expects to double revenue from this division over the next two years.

Electronics push: A $1 billion bet

Over the past few years, Amber has transformed itself from a RAC-focused component maker into a full-stack Electronics Manufacturing Services (EMS) platform. The pivot has been powered by rising demand for printed circuit board assemblies (PCBAs) and bare PCBs—areas where the company has aggressively scaled up.

Amber is betting big on this market, which is expected to grow at a 25% CAGR between FY24 and FY27 to reach nearly $7.3 billion. Management is targeting $1 billion in revenue from the electronics division by FY29, with margins projected to nearly double from 6.4% to about 12%.

The opportunity is significant. Currently, close to 90% of India’s bare PCB demand is met through imports. With the government pushing for domestic manufacturing, Amber is positioning itself as a key beneficiary. It has already filed two large applications under the Electronics Manufacturing Component Scheme (ECMS)— ₹990 crore for multilayer PCBs (via Ascent Circuits) and ₹3,200 crore for high-density interface PCBs (via its Korea Circuit JV). These projects qualify for reimbursements of nearly 70% of invested capital, sharply lowering the cost of building advanced manufacturing capacity.

Expansion isn’t just organic. Amber has also turned acquisitive to move into higher-margin businesses. Recent buys include Power-One Micro Systems, a leader in battery energy storage systems and solar inverters, and Israel-based Unitronics, which gives Amber a foothold in the fast-growing industrial automation and controls market. Together, these moves expand the company’s addressable market and strengthen profitability.

Seasonality and geopolitical risks persist

Despite the opportunity set, risks remain.

Q2 and Q3 are typically lean periods for the room air conditioner (RAC) industry, with performance hinging on festive season offtake. This creates wide fluctuations in Amber’s working capital needs, often straining cash flows. Management, however, maintains that a weak season does not alter the bullish long-term outlook for the sector.

To reduce this seasonality risk, Amber has expanded into non-AC businesses. These segments are expected to smoothen earnings volatility over the medium term. Still, acquisitions such as Unitronics Israel come with geopolitical risks, and the company expects muted growth from that unit in the near term.

Growth outpaces profits but margin recovery ahead

Over the past five years, Amber has posted a robust 29% revenue CAGR, supported by rising RAC demand and government incentives under the PLI scheme. Yet profitability has lagged due to higher competition, elevated input costs, and rising interest and depreciation expenses linked to capacity expansion and acquisitions.

Operating profit margins have largely stayed in the 6–7% band, while net profit margins averaged 2–3%. Net profit has grown at a slower 8.9% CAGR, well below topline growth.

Amber’s growth has come at the cost of efficiency. Its return on equity (11.3%) and return on capital employed (14.5%) lag peers such as Blue Star (20.6% and 26.2%) and Crompton (17.4% and 19%). The company also carries higher leverage, with a debt-to-equity ratio of 0.9x compared to near-zero levels for most peers.

Management expects consolidated margins to settle at 8–9% by FY26, aided by acquisitions such as Power-One and Unitronics. Heavy investments in PCB capacity are also expected to deliver mid-to-high teen margins. Backed by these initiatives, the company is targeting a stronger balance sheet and aims to turn net debt-free by FY26.

It plans capex of ₹3,000–3,500 crore over the next two years, to be funded through a mix of equity infusion, internal accruals, and liquidity. The board has already cleared a ₹2,500 crore raise, of which ₹1,000 crore has been mobilised via QIP. In addition, its electronics arm ILJIN has secured ₹1,200 crore from strategic investors.

Institutional backing grows

Institutional participation has risen steadily. Foreign Institutional Investor (FIIs) have increased their stake from 26.4% in Sep 2022 to 28.6% in Jun 2025, while DIIs have moved from 13.9% to 17.8% over the same period.

Together, they now own nearly 46% of Amber, up from 40% in late 2022 — underscoring rising confidence in its domestic manufacturing play.

Conclusion

Amber Enterprises has quickly evolved into more than just an air-conditioning play. With its push into electronics, railways, and defence, the company is positioning itself as a diversified manufacturing story aligned with India’s domestic production boom.

But the market has already priced in much of this optimism. At a lofty 104x PE — well above peers and even its own 10-year average — the stock leaves little margin for error.

For investors, the next leg of returns hinges not on topline growth alone, but on whether Amber can deliver sustained margin expansion and earnings consistency. Any stumble could spark a sharp correction.

For more such market analysis, read Profit Pulse.

Ayesha Shetty is a research analyst registered with the Securities and Exchange Board of India. She is a certified Financial Risk Manager (FRM) and is working toward the Chartered Financial Analyst (CFA) designation.

The author does not hold shares in any of the companies discussed. The views expressed are for informational purposes only and should not be considered investment advice. Readers should conduct their own research and consult a financial professional before making investment decisions.