Mehabe score: 3 G Factor: 3 Piotski Score: 5 The stock has a rating SELL. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 3 and Piotski score of 5.
Description
Subros Limited was incorporated in 1985 as a joint venture public limited company with Suri family of India (36.79% ownership), Denso Corporation, Japan (20% ownership) & Suzuki Motor Corporation, Japan (11.96% ownership). It is engaged in the business of manufacturing and supplying Auto Air Conditioning products for all major Automakers in Passenger and Commercial Vehicle Space. It has a technical collaboration with Denso Corporation
Main Points
Market Leadership
It is the largest and the only backward integrated manufacturing company in India for Auto Air Conditioning systems with a market share of ~45% in the Passenger vehicle Segment in FY20. #
It has a broad customer base, some of which are Maruti Suzuki, TATA Motors, SML ISUZU, Mahindra & Mahindra, Ashok Leyland, and a few othersSite:SUBROSMain Symbol:SUBROS
Stock trades at 312.0, below its 50dma 320.72. However it is trading above its 200dma 304.9. The stock remains weak in the short term due to near term bearish momentum. However overall bullish structure remains intact. Price action will further build up as it moves above its dma50, currently situated at 320.72.
The 52 week high is at 364.90 and the 52week low is at 218.50
Price Chart
P/E Chart
Sales and Margin
Strengths
– has reduced debt.
– is almost debt free.
– is expected to give good quarter
Weakness
– Stock is trading at 2.56 times its book value
-The company has delivered a poor sales growth of 6.70% over past five years.
– has a low return on equity of 8.97% for last 3 years.
-Dividend payout has been low at 8.97% of profits over last 3 years
-Promoter holding has decreased over last 3 years: -3.22%
Competition
– The industry trades at a mean P/E of 20.7x. WABCO India trades at the industry’s max P/E of 85.79x. SUBROS trades at a P/E of 27.2x
– Industry’s mean G-Factor is 3.2 while the mean Piotski score is 7.0. SUBROS has a G-Factor of 3 and Piotski scoreof 5.
– Average 1 month return for industry is -5.1%. The max 1- month return was given by Minda Industries: a return of -1.12 %
Quarterly Results
Sales for period ended Jun 2021 is Rs 480.45 cr compared to Rs 73.77 cr for period ended Jun 2020, a rise of 551.3%
Company reported operating profit of Rs 26.79 cr for period ended Jun 2021, operating profit margin at 5.6 %.
Operating profit was negative for the same period last year thus company has improved its margins this year
The EPS for Jun 2021 was Rs 0.51 compared to Rs 4.02 for previous quarter ended Mar 2021 and Rs -3.68 for Jun 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 2202.0 cr for period ended TTM vis-vis sales of Rs 1796.0 cr for the period ended Mar 2021, a healthy growth of 18.4%. The 3 year sales cagr stood at 1.2%.
Operating margins expanded to 10.0% for period ended TTM vis-vis 9.0% for period ended Mar 2021, expansion of 100.0 bps.
Net Profit reported at Rs 75.0 cr for period ended TTM vis-vis sales of Rs 47.0 cr for the period ended Mar 2021, rising 37.3%.
Company reported a poor Net Profit CAGR of -0.4% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
CashFlow from operating activities was positive.
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The stock has given a return of 41% on a 1 Year basis vis-vis a return of -3% over the last 3 Years. – The compounded sales growth on a TTM bassis is 47% vis-vis a compounded sales growth of -2% over the last 3 Years. – The compounded profit growth on a TTM basis is 287% vis-vis a compounded profit growth of -8% over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Jun 2021 fii holding stood at 0.6% vis-vis 1.05% for Mar 2021 – Public shareholding has remained largely constant. The Jun 2021 public holding stood at 51.73% vis-vis 51.51% for Mar 2021
Conclusion
– has reduced debt.
– is almost debt free.
– is expected to give good quarter – Stock is trading at 2.56 times its book value
-The company has delivered a poor sales growth of 6.70% over past five years.
– has a low return on equity of 8.97% for last 3 years.
-Dividend payout has been low at 8.97% of profits over last 3 years
-Promoter holding has decreased over last 3 years: -3.22%
Fundamentally, the stock remains weak. The business fundamentals are on shaky ground. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock reflects the poor fundamentals. The stock remains below its 50 DMA 320.72 and is trading at 312.0. It has shown near term lack of bullish momentum. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
