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Subros Outperformer – ICICI Research

May 4, 2007

Subros, a leading automobile air-conditioner manufacturer, reported a 8.7% growth in net sales for Q4FY07, while net profit declined 16.6%. For the full year, the company reported 14.6% revenue growth on buoyant volume growth, despite pressure on realizations. EBITDA margins improved marginally (50 basis points) to 11.4%, mainly due to increasing localization of raw materials that eased realization pressures. Net profit increased 14.2% to Rs 28.4 crore in line with ICICI’s expectations.

On the back of strong demand outlook, backed by surging volume growth from its key customers – Maruti Udyog and Tata Motors – ICICI maintains earning estimates for FY08. Post ICICI’s recommendation (Sept 21, 2006) at price of Rs 230, the stock surged to a high of Rs 299. It has corrected and is currently trading at Rs 235. At this price, it is available at attractive valuations of 7x its FY08E EPS of Rs 33.7. ICICI reiterates OUTPERFORMER rating on the stock.

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