Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Subros – 3QFY2011 Result Update
For 3QFY2011, Subros reported a weak performance on the bottom-line front,
despite healthy volume and top-line performance. Operating performance was
subdued during the quarter due to the substantial increase in raw-material cost
leading to a significant contraction in margins. We revise our earnings estimates
downwards to account for raw-material cost pressures and recommend Neutral
on the stock.
Overall performance below expectation: For 3QFY2011, Subros reported
healthy 19.7% yoy growth in net sales to `273.3cr (`228.2cr). Growth was
primarily driven by 18.1% yoy growth in volumes and a marginal 1.4% increase
in average net realisation. However, on a sequential basis, revenue and volume
declined by 1.8% and 4.6%, respectively. Operating profit during the quarter was
down by a significant 21.1% yoy, owing to contraction in EBITDA margins, which
declined by 384bp yoy to 7.4%. Thus, net profit declined by substantial 36.8% yoy
to `5.5cr (`8.7cr).
Outlook and valuation: We estimate the company’s volumes to post a ~16%
CAGR over FY2010–12E, considering the increasing requirements of its OEM
customers such as Maruti and Tata Motors and potential new client wins from the
PV and CV segments. However, we expect realisations to remain stable or decline
marginally due to the aggressive pricing adopted by OEMs. We have revised our
earnings estimates downwards to account for raw-material cost pressures and
estimate Subros to post EPS of `3.7 for FY2011E and `4.3 for FY2012E. At `38,
the stock is trading at 10.3x FY2011E and 8.9x FY2012E earnings.
We recommend Neutral on the stock.
Margin contracts by 384bp on input cost pressures: For 3QFY2011, Subros
registered a substantial 384bp yoy contraction in EBITDA margin, largely on
account of the 223bp yoy increase in raw-material costs, which as a percentage of
sales stood at 75.6% (73.3%). Further, increased other expenditure (up 126bp yoy)
and staff costs (up 35bp yoy) impacted margins. As a result, operating profit
declined by 21.1% yoy to `20.3cr (`25.7cr). Noticeably, operating margins
improved on a qoq basis by 71bp due to the 214bp decrease in raw-material cost,
leading to an 8.6% qoq increase in operating profit.
Net profit up 13.3% qoq but declines yoy: Despite healthy volume growth, net
profit declined significantly by 36.8% yoy to `5.5cr (`8.7cr) due to higher
raw-material cost. However, lower tax outgo during the quarter restricted the
further decline in the bottom line, with net profit growing by 13.3% qoq.
Investment arguments
�� Improved PV volumes to boost growth: We have estimated the PV segment to
post a healthy ~14% CAGR over FY2010–12E. Given the company’s
dependence on the PV segment, we expect it to gain from India’s small car
growth story. The company’s volumes would also get a push due to the
continuous capacity ramp-up by new and existing players. Accordingly,
we expect Subros to register a ~16% volume CAGR of over FY2010–12E.
�� Maintaining leadership position and expanding product base: A market leader
and the largest player in the domestic car AC market, Subros enjoys more
than 40% market share. The company has managed to garner a high market
share on the back of its strong technological expertise backed by Denso and
Suzuki. Further, in view of growing PV volumes, the company has ramped up
its capacity to 1mn units per year and proposes to expand capacity to 1.5mn
units per year in the first phase and further to about 2mn units per year in the
next two–three years. The capacity expansion will enable Subros to assure
volume to its OEM customers and to capture increased demand, as it is
already operating at ~93% of its enhanced capacity.
The company is planning to set up a new facility in Chennai to meet the
increasing OEM demand in the domestic market. As per management, the
new plant is being set up to cater to auto manufacturers in Chennai.
The company will also be investing about `100cr in the next two years to
expand the production capacities of its existing three facilities in Noida,
Manesar and Pune. Further, the company is looking at opening a plant in
Sanand to supply parts to Nano.
Management also proposes to foray into the CV segment, targeting leaders
such as Ashok Leyland and Eicher, to expand the company’s product base and
explore new avenues.
Outlook and valuation
We estimate Subros to post a ~16% volume CAGR of over FY2010–12E,
considering the increasing requirements of its OEM customers such as Maruti and
Tata Motors and potential new client wins from the PV and CV segments. However,
we expect realisations to remain stable or decline marginally due to the aggressive
pricing adopted by OEMs. We have revised our earnings estimates downwards to
account for raw-material cost pressures and estimate Subros to post EPS of `3.7
for FY2011E and `4.3 for FY2012E. At `38, the stock is trading at 10.3x FY2011E
and 8.9x FY2012E earnings. We recommend Neutral on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Subros – 3QFY2011 Result Update
Angel Broking recommends a Neutral on Subros.
despite healthy volume and top-line performance. Operating performance was
subdued during the quarter due to the substantial increase in raw-material cost
leading to a significant contraction in margins. We revise our earnings estimates
downwards to account for raw-material cost pressures and recommend Neutral
on the stock.
Overall performance below expectation: For 3QFY2011, Subros reported
healthy 19.7% yoy growth in net sales to `273.3cr (`228.2cr). Growth was
primarily driven by 18.1% yoy growth in volumes and a marginal 1.4% increase
in average net realisation. However, on a sequential basis, revenue and volume
declined by 1.8% and 4.6%, respectively. Operating profit during the quarter was
down by a significant 21.1% yoy, owing to contraction in EBITDA margins, which
declined by 384bp yoy to 7.4%. Thus, net profit declined by substantial 36.8% yoy
to `5.5cr (`8.7cr).
Outlook and valuation: We estimate the company’s volumes to post a ~16%
CAGR over FY2010–12E, considering the increasing requirements of its OEM
customers such as Maruti and Tata Motors and potential new client wins from the
PV and CV segments. However, we expect realisations to remain stable or decline
marginally due to the aggressive pricing adopted by OEMs. We have revised our
earnings estimates downwards to account for raw-material cost pressures and
estimate Subros to post EPS of `3.7 for FY2011E and `4.3 for FY2012E. At `38,
the stock is trading at 10.3x FY2011E and 8.9x FY2012E earnings.
We recommend Neutral on the stock.
Net sales up 19.7%, lower than expectations: For 3QFY2011, Subros reported a
19.7% yoy jump in net sales to `273.3cr (`228.2cr), which was marginally lower
than our expectations. Growth was primarily driven by 18.1% growth in volumes,
with the company selling 222,460 (188,319) AC units in 3QFY2011. Average net
realisation increased marginally by 1.4% yoy during the quarter. However, on a
sequential basis, revenue and volumes declined by 1.8% and 4.6%, respectively.
Margin contracts by 384bp on input cost pressures: For 3QFY2011, Subros
registered a substantial 384bp yoy contraction in EBITDA margin, largely on
account of the 223bp yoy increase in raw-material costs, which as a percentage of
sales stood at 75.6% (73.3%). Further, increased other expenditure (up 126bp yoy)
and staff costs (up 35bp yoy) impacted margins. As a result, operating profit
declined by 21.1% yoy to `20.3cr (`25.7cr). Noticeably, operating margins
improved on a qoq basis by 71bp due to the 214bp decrease in raw-material cost,
leading to an 8.6% qoq increase in operating profit.
Net profit up 13.3% qoq but declines yoy: Despite healthy volume growth, net
profit declined significantly by 36.8% yoy to `5.5cr (`8.7cr) due to higher
raw-material cost. However, lower tax outgo during the quarter restricted the
further decline in the bottom line, with net profit growing by 13.3% qoq.
Investment arguments
�� Improved PV volumes to boost growth: We have estimated the PV segment to
post a healthy ~14% CAGR over FY2010–12E. Given the company’s
dependence on the PV segment, we expect it to gain from India’s small car
growth story. The company’s volumes would also get a push due to the
continuous capacity ramp-up by new and existing players. Accordingly,
we expect Subros to register a ~16% volume CAGR of over FY2010–12E.
�� Maintaining leadership position and expanding product base: A market leader
and the largest player in the domestic car AC market, Subros enjoys more
than 40% market share. The company has managed to garner a high market
share on the back of its strong technological expertise backed by Denso and
Suzuki. Further, in view of growing PV volumes, the company has ramped up
its capacity to 1mn units per year and proposes to expand capacity to 1.5mn
units per year in the first phase and further to about 2mn units per year in the
next two–three years. The capacity expansion will enable Subros to assure
volume to its OEM customers and to capture increased demand, as it is
already operating at ~93% of its enhanced capacity.
The company is planning to set up a new facility in Chennai to meet the
increasing OEM demand in the domestic market. As per management, the
new plant is being set up to cater to auto manufacturers in Chennai.
The company will also be investing about `100cr in the next two years to
expand the production capacities of its existing three facilities in Noida,
Manesar and Pune. Further, the company is looking at opening a plant in
Sanand to supply parts to Nano.
Management also proposes to foray into the CV segment, targeting leaders
such as Ashok Leyland and Eicher, to expand the company’s product base and
explore new avenues.
Outlook and valuation
We estimate Subros to post a ~16% volume CAGR of over FY2010–12E,
considering the increasing requirements of its OEM customers such as Maruti and
Tata Motors and potential new client wins from the PV and CV segments. However,
we expect realisations to remain stable or decline marginally due to the aggressive
pricing adopted by OEMs. We have revised our earnings estimates downwards to
account for raw-material cost pressures and estimate Subros to post EPS of `3.7
for FY2011E and `4.3 for FY2012E. At `38, the stock is trading at 10.3x FY2011E
and 8.9x FY2012E earnings. We recommend Neutral on the stock.
No comments:
Post a Comment