Subros Ltd. share price target

Expect EPS growth of 32% over FY18-21E. Maintain BUY with TP Rs 435(20xSep-20E EPS) Subros delivered strong numbers in 2QFY19 despite several headwinds like slowdown in PVs segment and unfavorable currency movement. Strong growth was attributed to acquiring new business(like compressor for Tata Tiago and Nexon) in core PV AC segment, shift in demand towards petrol variants and strong revenue from other verticals like bus/truck ACs and radiators, Revenue/EBITDA rose 14/9% YoY (beat est).

Revenue Breakup Subros recorded sales of `10.95bn in H1FY19. `8.6bn out of the above was contributed by the car segment, `1.4bn from ECM segment and the rest `0.96bn was contributed by the CV segment. Subros expects double digit growth in the car segment, contribution of `2.8-2.9bn from ECM segment in FY19 and `2bn from CV segment in FY19. The company has mentioned that it is not expecting any slowdown in revenue growth over the next 6 months from Maruti as the models in which it is...

Subros Ltd is the leading manufacturer of air conditioning systems (ACs) for the passenger vehicles (PV) in India with Maruti Suzuki India Ltd. It also supplies its products to the Commercial Vehicles (CVs) segment i.e. Trucks, Buses, Reefer transports and Off- roaders. We believe MSIL would be the biggest beneficiary (expect 13% CAGR), thus benefitting Subros which supplies ~70% of the MSILs total AC requirement. Further, improving share of business (SoB) with other OEMs (Tata Motors, Renault Nissan, Mahindra & Mahindra) and entry into radiators segment would aid revenue growth. We expect Subros PV segment revenue to grow at 14% CAGR to INR22.7bn over FY18-20E. mandatory AC/blower in trucks from Jan18 opens up a new revenue stream for the company. Its entry into CV ACs, railways and home AC offers incremental opportunities over the next 3-5 years. We expect non PV segment to report revenue CAGR of 40% to INR2.

We roll forward our TP on Sep-20(20x) at Rs 435 vs Rs 384 earlier. Maintain BUY Driven by strong growth in core PV AC business and incremental revenue from new business verticals like bus/truck ACs and radiators, Subros printed impressive numbers in 1QFY19. Revenue/EBITDA rose 28/29% YoY (in line with est). EBITDA margin remains flat YoY at 10.7%, increase in RM cost (change in product mix and adverse FX movement) was offset by oplev. APAT jumped 95% YoY at Rs 223mn supported by lower depreciation (-22% QoQ).

Commencement of supplies of Truck Blowers Subros commenced supplies of blowers for application in commercial vehicles to major OEM's from Q4FY18. Subros has a market share of 70% and the size of the opportunity (annual) is `1.75-2bn. The revenue generated from supplies of blowers and A/cs to trucks during the quarter was...

Subros reported Q4FY18 results. Following are the key highlights: o Net Sales rose by 34.4% (YoY) to `5.5bn o EBITDA Margins contracted by 108bps (YoY) to 11.5%...

We value stock Rs 384 (20x FY20E EPS). Maintain BUY Driven by strong growth in core PV AC business and incremental revenue from new business verticals like bus/truck ACs and radiators, Subros printed impressive numbers in 4QFY18. Revenue (+34% YoY, Rs. 5.52bn) and EBITDA (+23% YoY, Rs 637mn) beat expectations. EBITDA margin at 11.5% (+91bps YoY) benefited from operating leverage. APAT grew by 35% YoY to Rs 186mn

Upgrade from Neutral to BUY with TP of Rs 384 (20x FY20E EPS). SUBROS has corrected by nearly 30% over the last three months on concerns of Truck AC business. This was post the governments policy change allowing blowers in trucks above 3.5T, instead of complete ACs. Since blowers are cheaper (by ~80% vs ACs) the boost to topline will be much lesser. However, we still believe this business will help add Rs 1.2-1.5bn from FY19 and grow faster than the rest of the business, given its nascent stage.

Recently, Subros reported Q3FY18 results. Following are the key highlights: o Net Sales Up by 21.5% (YoY) to `4.4bn o EBITDA Margins contracted by 73bps (YoY) to 10.6%...