We expect Subros to clock a revenue CAGR of 13% over
FY2014-FY2017 aided by a recovery in the passenger vehicle industry and
market share regain by its key clients. Initiation of supplies to Denso Corporation
would also boost Subros top-line. Also, Subros’ margins are expected to improve
owing to increased localisation, operating leverage and weakness in JPY. We also
expect the companys interest costs to recede, given the reduction in the debt
levels. We expect Subros to report a PAT CAGR of 29% over FY2014-FY2017. At
the current market price of Rs67, the stock trades at 15.3x and 9.2x its FY2016
and FY2017 earnings, respectively. We initiate coverage on the stock with a Buy
recommendation and target price of Rs80 based on 11x FY2017E EPS, indicating
an upside of 19% from the current levels.

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