Get App
Last Updated : Apr 24, 2018 04:55 PM IST | Source:

Buy Subros; target of Rs 384: HDFC Securities

HDFC Securities is bullish on Subros has recommended buy rating on the stock with a target price of Rs 384 in its research report dated April 23, 2018.

Broker Research @moneycontrolcom
  • bselive
  • nselive
Todays L/H

HDFC Securities' research report on Subros

SUBROS has corrected by nearly 30% over the last three months on concerns of Truck AC business. This was post the government’s 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. Meanwhile,  Subros’  core  PV  AC  business will continue to deliver strong growth  (14%  CAGR  over  FY18-20E) helped by faster growth in Maruti, Tata Motors  and  M&M  PV sales and wallet-market share gains. More importantly, growth potential of new  businesses like Truck/Bus Aircon, radiators and Condensers  is  very  high (~30% CAGR over the next 3-5 years) and provides scale and diversification. In 9MFY18,  Subros saw 21/49% growth in Revenue/PAT. Key positives include (1) Steady volume growth ~8% in PVs over FY18E, plus rising wallet share at key  OEMs  (+400bps  YoY  increase  in  PV  marketshare  in FY18) driven by refreshes  and  new models like Swift, Dzire, Baleno, Brezza, Renault Kwid, Tata Tiago, (2) Strong traction in Truck Aircons and Radiators, and (3) ROE expansion  with  improvement in margin (4) Improving cash flows, leading to debt reduction.

We expect EPS growth of 45% CAGR over FY18-20E led by 17% CAGR in top line, 70 bps margin expansion and 35% cut in interest cost.  Upgrade from Neutral to BUY with TP of Rs 384 (20x FY20E EPS).

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on are their own, and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.

Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.
First Published on Apr 24, 2018 04:55 pm
Follow us on
Available On
PCI DSS Compliant