Download Way2Wealth Updates Subros Ltd. 09 February 2017

RESULT UPDATE
CMP: `187
HOLD
FEBRUARY 9TH, 2017
Subros Ltd.
Nifty
8,769
Sensex
28,290
KEY RESULT HIGHLIGHTS – Q3FY17
KEY STOCK DATA
CMP
Market Cap (Bn)
52W High/Low
Bloomberg
`187
`11.2
194.95/73.2
SUBR@IN
3-m daily average vol
131,295
SHAREHOLDING PATTERN
DEC 2016
Promoters
40.0%
FIIs & DIIs
Public & Others
5.5%
54.5%
(` mn)
YEAR
FY17E
FY18E
FY19E
Sales
20,442
15,495
18,206
EBITDA
1,690
2,077
2,393
OPM(%)
10.9%
11.4%
11.7%
401
628
899
EPS (`)
6.7
10.5
15.0
P/E(x)
28.0
17.9
12.5
PAT
Subros Q3FY17 results were mostly in line with our expectations. Following are the key
highlights of Q3FY17:
[email protected]
[email protected]
o
EBITDA Margins contracted by 75bps to 11.2%
o
PAT increased by 86.7% to `112mn
Started supplies to Maruti Suzuki Ignis – Maruti Suzuki recently launched Ignis in
January, 2017. Subros has a 100% market share for the Ignis model and had started
the supply of AC systems to it. Subros also has 100% market share for Swift, Baleno
and Brezza.
Radiator supply to Maruti to begin from February 2017 – Subros started supplying
radiators to Maruti (Via Denso) from February 2016. However due to fire incident at
Manesar plant, radiator manufacturing was stopped. The Company expects to resume
the radiator production from this month (February
bruary 2017) and anticipates to book `11.2bn sales from this facility on yearly basis.
Order from Indian Railways – Subros has been supplying cab mounted HVAC units to
Indian Railways for driver cabin application. It has received its third order from the
Indiann Railways for supplies of 306 kits, the value of which is estimated to be `120mn.
50% of the order is expected to be completed by Q4FY17.
Supply of Home AC Components (condenser) to
t Whirlpool to gain momentum –
Subros has started to supply condenser
denser to Whirlpool for home AC segment and
anticipates to garner `70-100mn
100mn annual sales from the same. Management expects this
segment has a potential to achieve `300-400mn
400mn sales over the next 3-4 years.
Air-conditioners
conditioners mandatory in Commercial vehicles from 1st April, 2017 – The Govt.
through an amendment has made it mandatory for commercial vehicle manufacturers to
fit air-conditioners in all new trucks sold from 1st April, 2017. Subros expects
expect to garner
additional revenues of `1200-1250mn
1250mn from this opportunity over the next 3-4 years.
Loss from fire in Manesar Plant on a declining trend – The management has indicated
that the loss arising from the fire at its Manesar plant is still to be recognised and it is
likely to be very nominal and would be recognised in Q4FY17. Q1FY18 onwards, there
would be no loss still to be recognised.
Reduction of raw material imports – Subros currently imports about 50% of its raw
material. Going forward, the management
agement plans to significantly reduce its imports from
the current 50% to 35%
% of the total raw material cost. This would significantly reduce
the raw material cost of the company and reduce its currency fluctuation exposure.
Muted capex plans for the next 2 years –Subros has planned a capital expenditure of
`400-450mn
450mn each year for the next 2 years which is significantly less than the capex
Subros has incurred in the past years. This is likely to lead to better return and
profitability ratios going forward.
Debt Reduction – Subros has a current debt of `3.9bn which management plans to
bring it down to half over the next two years on the back of robust operational cash
generation by the Company
Tax Rate – Dueto robust R&D spend, Tax rate for Subros is likely to in the range of 1520% over the next two years.
Chintan Gupta
Tel: +9122-66638972
Net Sales Up by 13.4% (YoY) to `3.7bn
CONCALL HIGHLIGHTS
Mahesh Bendre
Tel: +9122-61462937
o
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Subros Ltd.
Result Update
February 9th, 2017
VIEWS AND VALUATIONS
Subros is supported by strong lineage and is well-equipped
equipped to ride the next wave in the
automobile industry in India. Apart from its core business of Car AC the Company has
successfully forayed into a) Radiators business to Maruti b) Driver Cabin AC for Railways
successfully
and c) Condenser supply to Whirlpool. Based on these initiatives we believe the company is
poised for profitable growth over the medium term. We expect Subros to post Sales
Sale and
Profit CAGR of 14.9% and 49.8% over FY17-19E
FY17 19E respectively. At the CMP of `187 the
stock trades at a PE of 12.5x
12.5 FY19E earnings
rnings and EV/EBITDA of 5.2x FY19E earnings.
We assign HOLD rating on the stock.
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Subros Ltd.
Result Update
February 9th, 2017
QUARTERLYRESULTS
Net Sales
Materials consumed
Changes in inventories
Staff Cost
Other expenditure
Total Expenditure
EBITDA
Depreciation
EBIT
Interest
Other Income
PBT
Tax
PAT
Exceptional items
Reported Profit
EPS (before exceptional items) (`)
MARGINS
Gross margins
EBITDA
PAT
Tax Rate
Q3FY16
YoY%
Q2FY17
QoQ%
9MFY17
9MFY16
3,729
2,508
32
394
376
3,310
3,288
2,244
(34)
332
352
2,894
13.4%
11.8%
-193.6%
18.5%
7.0%
14.4%
4,375
3,105
(20)
394
428
3,906
-14.8%
-19.2%
-258.6%
0.1%
-12.0%
-15.3%
11,348
7,899
(66)
1,138
1,162
10,133
9,469
6,441
(51)
959
1,004
8,352
19.8%
22.6%
29.4%
18.7%
15.7%
21.3%
419
210
209
105
-4
100
-12
112
-80
32
1.87
394
222
172
115
10
67
7
60
0
60
1.00
6.3%
-5.1%
21.1%
-9.3%
-141.2%
48.4%
-270.8%
86.7%
0.0%
-45.6%
86.7%
468
216
253
102
2
153
-16
168
-125
43
2.81
-10.6%
-2.7%
-17.4%
2.2%
-282.6%
-34.5%
-22.2%
-33.3%
-36.6%
-24.0%
-33.3%
1,215
661
554
310
31
274
-37
311
-243
68
5.2
1,117
638
479
315
14
178
16
162
0
162
2.7
8.9%
3.6%
23%
-1.6%
0%
55.4%
-331.3%
93.8%
NA
-57.1%
25%
Q3FY17
Q3FY16
YoY (bps)
Q2FY17
QoQ (bps)
9MFY17
9MFY16
YoY (bps)
31.9%
11.2%
3.0%
-12%
32.8%
12.0%
1.8%
11%
-90
-75
118
-2301
29.5%
10.7%
3.8%
-10.4%
240
52
-84
-195
31.0%
10.7%
2.7%
-13%
32.5%
11.8%
1.7%
9%
-154
-108
105
-2249
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(`mn)
YoY%
Q3FY17
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Subros Ltd.
Result Update
February 9th, 2017
FINANCIALS
(`mn)
INCOME STATEMENT
FY16
FY17E
FY18E
FY19E
Net sales
YoY (%)
13,107
9.0
15,495
18.2
18,206
17.5
20,442
12.3
Raw material cost
Employee Cost
SGA cost
Total expenses
8,834
1,337
1,416
11,586
10,551
1,581
1,673
13,805
12,343
1,857
1,930
16,130
13,797
2,085
2,167
18,049
1,521
11.6
1,690
10.9
2,077
11.4
2,393
11.7
Depreciation
EBIT
865
656
866
824
964
1,113
1,013
1,380
Interest
Other income
PBT
417
25
264
397
24
451
322
11
802
255
14
1,139
(-) Tax
Tax/ PBT
PAT
YoY (%)
PAT (%)
Extraordinary Items
Reported PAT
24
9.2
240
19.3
1.8%
0
240
50
11.1
401
67.3
2.6%
-240
161
175
21.8
628
56.6
3.4%
0
628
240
21.0
899
43.3
4.4%
0
899
KEY RATIOS
FY16
FY17E
FY18E
FY19E
EPS (Std)
Book value
4.0
56
6.7
58
10.5
66
15.0
77
DPS
0.8
0.5
2.1
3.0
P/E
EV/EBDITA (x)
P/B (x)
EV/Sales
46.8
9.3
3.3
1.1
28.0
8.2
3.2
0.9
17.9
6.3
2.8
0.7
12.5
5.2
2.4
0.6
Div Yield
0.4%
0.3%
1.1%
1.6%
ROCE
ROE
10%
7%
13%
12%
16%
17%
19%
21%
Debt-equity (x)
Current Ratio
0.9
0.3
0.8
0.3
0.5
0.3
0.3
0.3
Gross Asset Turnover
Working Capital Days
W/C % of sales
1.2
8
1%
1.3
5
2%
1.5
9
3%
1.6
12
4%
EBIDTA
EBIDTA (%)
BALANCE SHEET
FY16
FY17E
FY18E
FY19E
Equity capital
Reserves
Net worth
120
3,231
3,351
120
3,354
3,474
120
3,835
3,955
120
4,524
4,644
Total Loans
Deferred Tax Liability
Total Liabilities
2,973
27
6,350
2,623
27
6,124
1,973
27
5,955
1,223
27
5,893
Gross block
Less: Acc. Depreciation
Net block
CWIP
Investments
11,605
6,459
5,146
1,029
0
12,105
7,325
4,780
1,029
0
12,605
8,289
4,316
1,029
0
13,355
9,301
4,053
1,029
0
1,766
994
78
3
996
3,836
3,566
94
176
0
6,350
2,303
1,053
8
3
1,177
4,543
4,117
112
315
0
6,124
2,863
1,237
61
4
1,474
5,638
4,898
131
610
0
5,955
3,313
1,389
23
4
1,758
6,487
5,528
147
811
0
5,893
CASH FLOW
FY16
FY17E
FY18E
FY19E
Net profit
Depreciation
Deferred tax
Change in working cap
Cash from Operations
240
865
0
348
1,453
161
866
0
(209)
818
628
964
0
(242)
1,350
899
1,013
0
(240)
1,672
-1,032
1,032
0
(500)
0
(500)
0
(750)
0
-1,032
1,032
(500)
(500)
(750)
Free Cash Flow
420
318
850
922
Dividend
-56
(38)
(147)
(210)
0
0
0
0
Inventories
Debtors
Cash
Other current assets
Loans and advances
Current assets
Current liabilities
Provisions
Net current assets
Miscell. Exp.
Total Assets
Capex
Investments
Cash from
Investments
Fresh equity
Debt
-362
362
(350)
(650)
(750)
Cash from Financing
-418
418
(388)
(797)
(960)
Net change in cash
3
(70)
53
(38)
Opening cash
75
78
8
61
Closing cash
78
8
61
23
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Result Update
February 9th, 2017
TEAM
ANALYST
DESIGNATION
Alok Ranjan
Mahesh Bendre
Jaisheel Garg
Shivani V. Vishwanathan
Chintan Gupta
Ashwini Sonawane
Head – Research
AVP
AVP
AVP
Research Associate
Research Associate
INSTITUTIONAL SALES
Bhavika Ravasia
SECTOR
EMAIL
TELEPHONE
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
+9122-6663 8950
+9122-6146 2937
+9122-6146 2974
+9122-6663 8956
+9122-6663 8972
+9122-4019 2956
DESIGNATION
EMAIL
TELEPHONE
Senior Manager
bhavikaravasia@way2we
[email protected]
+9122-4019 2995
INSTITUTIONAL DEALING
DESIGNATION
EMAIL
TELEPHONE
Mitul Doshi
Institutional Sales Trader
[email protected]
+9122-4027 8932
Capital Goods, Auto, Auto Ancillary
Power, Power Equipment, Coal Mining
FMCG, Consumer Durables
Way2Wealth Brokers Pvt. Ltd. (CIN
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Result Update
February 9th, 2017
Disclaimer
Analyst Certification: We, Mahesh Bendre & Chintan
hintan Gupta, the research analystand author of this report, hereby certify that the views
expressed in this research report accurately reflect our personal views about the subject securities, issuers, products, sectors
sect
or industries. It is
also certified that no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific
spe
recommendations or views in this research. The analyst(s), principally responsible for the preparation of this research report,
repor receives
compensation based on overall revenues of the company (Way2Wealth Brokers Private Limited, hereinafter referred to as Way2Wealth)
Way2Wea
and has
taken reasonable care to achieve and maintain independence and objectivity in making any recommendations.
It is confirmed that Mahesh Bendre &Chintan
Chintan Gupta,
Gupta the author of this report has not received any compensation from the companies mentioned
in the report in the preceding 12 months. Our research professionals are paid in part based on the profitability of Way2Wealth, which include
earnings from other business. Neither Way2Wealth nor its directors, employees, agents or representatives shall be liable for any damages
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Disclosure of Interest Statement in Subros Ltd. as on February 9, 2017
Name of the Security
Subros Ltd.
Name of the analyst
Mahesh Bendre, Chintan Gupta
Analysts’ ownership of any stock related to the information
informatio
contained
Financial Interest
Analyst :
Analyst’s Relative
e : Yes / No
Analyst’s Associate/Firm : Yes/No
No
Conflict of Interest
No
Receipt of Compensation
No
Way2Wealth ownership of any stock related to the information
contained
NIL
Broking
roking relationship with company covered
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Investment Banking relationship with company covered
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quer
Way2Wealth Brokers Pvt. Ltd. (CIN
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