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L o c a l i s a t i o n b e n e f i t s h e l p i n m a r g i n s r i s e …
Subros reported its Q1FY12 numbers that were above our estimates. The
topline came in line with our expectation at | 252.2 crore (I-direct
estimate: | 251.5 crore), a jump of 7.8% YoY due to volumes and
realisation improvement. On the raw material front, the company saw a
significant improvement (down 315 bps as a proportion to sales) owing to
complete localisation of parts like RS evaporators and heater core leading
to lower dependence on Japanese imports. EBITDA margins escalated to
10.3% (up 120 bps QoQ) with lower RM costs offsetting higher employee
expenses (up 85 bps YoY). The reported PAT was at | 8.0 crore (I-direct
estimate: | 6.6 crore). The company is availing tax benefits of MAT credit
entitlement accruing from higher R&D spending and paid only deferred
tax to the tune of | 1.6 crore in Q1FY12.
ƒ Margins perk up as complete localisation reduces forex exposure
The company witnessed margin expansion due to higher realisations on
an improving product mix. On the cost front, Subros was able to curtail its
costs with the help of complete localisation of components like RS
evaporators and heater core. It has led to a decline in forex exposure and
also has provided cost efficiencies. The personnel expenses have
increased on this account (up 85 bps YoY) as localisation would lead to
higher salary expense for the company. Subros supplies ~73% of its
sales to Maruti Suzuki, 16% towards Tata Motors, M&M contributing ~8%
of sales and ~3% from others. PV sales grew at 9.3% YoY for Q1FY12.
V a l u a t i o n
Going forward, input prices are expected to moderate further due to the
company’s localisation practices. However, sluggish growth in the
domestic automotive space remains a concern in the near term. At the
CMP of | 34, the stock is trading at 5.3x FY12E EPS of | 6.4 and 3.6x
FY13E EPS of | 9.4. We have valued it at 4.0x FY13 EPS of | 9.4 to arrive
at a target price of | 38. Our target price implies an upside of 12%. We are
recommending a BUY rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
L o c a l i s a t i o n b e n e f i t s h e l p i n m a r g i n s r i s e …
Subros reported its Q1FY12 numbers that were above our estimates. The
topline came in line with our expectation at | 252.2 crore (I-direct
estimate: | 251.5 crore), a jump of 7.8% YoY due to volumes and
realisation improvement. On the raw material front, the company saw a
significant improvement (down 315 bps as a proportion to sales) owing to
complete localisation of parts like RS evaporators and heater core leading
to lower dependence on Japanese imports. EBITDA margins escalated to
10.3% (up 120 bps QoQ) with lower RM costs offsetting higher employee
expenses (up 85 bps YoY). The reported PAT was at | 8.0 crore (I-direct
estimate: | 6.6 crore). The company is availing tax benefits of MAT credit
entitlement accruing from higher R&D spending and paid only deferred
tax to the tune of | 1.6 crore in Q1FY12.
ƒ Margins perk up as complete localisation reduces forex exposure
The company witnessed margin expansion due to higher realisations on
an improving product mix. On the cost front, Subros was able to curtail its
costs with the help of complete localisation of components like RS
evaporators and heater core. It has led to a decline in forex exposure and
also has provided cost efficiencies. The personnel expenses have
increased on this account (up 85 bps YoY) as localisation would lead to
higher salary expense for the company. Subros supplies ~73% of its
sales to Maruti Suzuki, 16% towards Tata Motors, M&M contributing ~8%
of sales and ~3% from others. PV sales grew at 9.3% YoY for Q1FY12.
V a l u a t i o n
Going forward, input prices are expected to moderate further due to the
company’s localisation practices. However, sluggish growth in the
domestic automotive space remains a concern in the near term. At the
CMP of | 34, the stock is trading at 5.3x FY12E EPS of | 6.4 and 3.6x
FY13E EPS of | 9.4. We have valued it at 4.0x FY13 EPS of | 9.4 to arrive
at a target price of | 38. Our target price implies an upside of 12%. We are
recommending a BUY rating on the stock.
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