Scripscan:Subros Ltd
cmp:23
Code:517168
Story:Subros Limited engages in the manufacture and sale of automotive air conditioning systems, and parts and components in India. It offers compressors, condensers, evaporators, blowers, heaters, and tubes and hoses.Subros reported modest 7.8% yoy (down 16.9% qoq) growth in its net sales to Rs252cr for 1QFY2012. Top-line growth was driven by 7.3% yoy (3.2% qoq) growth in average net realisation, as volumes remained flat. Realisation improved due to price hikes and change in product mix. On a sequential basis, volumes declined steeply by 19.5%, in-line with the volume decline in the passenger car industry. Operating margin registered an 84bp yoy (99bp qoq) expansion on account of a 393bp yoy fall in raw-material cost. Local production of evaporators as an import substitute also resulted in cost reduction to a certain extent. However, other expenditure increased by 221bp yoy, restricting further margin improvement. As a result, net profit grew by 12.5% yoy (down 26.9% qoq) to Rs8cr. The significant increase in interest cost (up 61.6% yoy to Rs6cr), however, arrested further bottom-line growth.However Net profit of Subros declined 35.93% to Rs 3.12 crore in the quarter ended September 2011 as against Rs 4.87 crore during the previous quarter ended September 2010. Sales declined 13.55% to Rs 240.49 crore in the quarter ended September 2011 as against Rs 278.19 crore during the previous quarter ended September 2010.After the latest dismal 2nd quarter result,I estimate Subros to register a CAGR of 8% in volumes over FY2011–13E, leading to a ~10% CAGR in revenue.I expect the company’s margin to improve marginally on account of localisation of products such as evaporators and heater core. However, bottom-line growth will be restricted due to increased interest cost. At Rs 23, the stock is trading at 5x FY2013E earnings.Keep holding the stock.
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