Amber Enterprises shares gain 3% as it inks manufacturing deal with Oppo India

Shares of Amber Enterprises India Ltd. gained over 3% in early trade on Friday, June 19, after the company said it has signed a manufacturing collaboration agreement with Oppo India.

Oppo India is a licensed manufacturer of mobile phones for brands such as OPPO, OnePlus and Realme in India.

As per the agreement, Amber Group will manufacture mobile phones for the brands, combing their global product expertise with the Indian partner's manufacturing scale, operational capabilities, capacity to enhance local value addition and local supply-chain strengths.

The company said the collaboration represents an important milestone in its efforts to expand its role in manufacturing and strengthening its long-term growth platform.

It added that the collaboration is expected to create opportunities for operational synergies and reinforce Amber's position as a preferred entity for B2B manufacturing. Both companies will work closely to ensure a gradual smooth ramp-up and to explore additional opportunities for future collaboration, it said.

"This collaboration underscores our manufacturing capabilities and our ability to support globally recognized brands with quality, reliability, value addition and scale," Jasbir Singh, the executive chairman and CEO of Amber Enterprises India Ltd., said.

CLSA Remains Bullish On Amber

CLSA has an "outperform" rating on Amber Enterprises with a price target of ₹8,100.

The brokerage said that the Oppo, OnePlus and Realme brands sell nearly 39 million phones, of which the opportunity for Amber is likely to be between 10 million to 15 million.

"While we await details of the arrangement, we estimate this to have a low double-digit to high teen impact on valuations," the brokerage said.

This also marks Amber's entry into a new business, thereby diversifying its exposure, CLSA said, adding that for incumbents like Dixon, it could mean higher competitive intensity.

JPMorgan Remains Cautious

The brokerage is "neutral" on the stock with a price target of ₹7,650.

JPMorgan warned that Amber's foray into this new segment is likely to be margin dilutive as the mobile manufacturing operates at a 3% margin, compared to Amber's consolidated full year margin of 8%.

"We wait for further details from Amber over due course in terms of capital commitment for mobile manufacturing and volume targets," JPMorgan wrote in its note.

What Does Amber's New Foray Mean For Dixon?

JPMorgan wrote in its note that OPPO is one of the brands that has large in-house opportunities in India and with that opportunity going to Amber, it limits Dixon's ability to capture incremental outsourcing market share.

Shares of Amber Enterprises gained 3.2% in early trade on Friday at 8,218 apiece. The stock has gained 15.3% in the past month and 27.5% this year, so far.

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