Angel Broking neutral on Subros

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Angel Broking neutral on Subros

Angel Broking has maintained neutral rating on Subros, in its February 4, 2011 research report.

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Angel Broking has maintained neutral rating on Subros , in its February 4, 2011 research report.

"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."

"Subros reported healthy 19.7% yoy growth in net sales to Rs 273.3 crore (Rs 228.2 crore). 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 Rs 5.5 crore (Rs 8.7 crore)."

"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 Rs 3.7 for FY2011E and Rs 4.3 for FY2012E. At Rs 38, the stock is trading at 10.3x FY2011E and 8.9x FY2012E earnings. We recommend Neutral on the stock," says Angel Broking research report.

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To read the full report click on the attachment