Khambatta Securities' research report on Subros
With 65% of FY21 revenues coming from the Suzuki group (Maruti Suzuki and Suzuki Motor Gujarat combined), management expects the Suzuki group’s contribution to be 65% to 70% in the next 3 years. Tata Motors and Mahindra & Mahindra are amongst other major customers of Subros with the company commanding shares of ~20% and ~30% of the thermal products’ business generated from the OEMs. Management has a revenue target of Rs 100 crore from Home AC in FY22 (Rs 88 crore or 5% revenue contribution in FY21). With capacity utilisation of 50% to 55% in 4Q FY21, the Home AC unit has an annual production capacity of 2.5 lakh units with the potential to generate peak revenues of ~Rs 200 crore. Capex plans include Rs 110-110 crore / Rs 70 crore / Rs 65 crore in FY22/FY23/FY24 in brownfield expansion, leading to the expasnion of HVAC/compressor capacities from 20 lakh / 15 lakh units to 25-27.5 lakh / 20 lakh units.
Outlook
Basis expectations of robust sales growth, driven by buoyant end-market demand, and improvement in profitability, we reiterate a BUY rating with a price target of Rs 385 (at 22.0x FY23E EPS) and an upside of 18% from current levels.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Read More