* Subros is largest manufacturer of Auto air conditioning systems in India. Subros started its operations with a capacity of 15,000 AC units and has grown multi-fold since then and has taken its capacity to 1.5 million AC kits annually. It has six manufacturing plants across Noida, Manesar, Pune, Chennai and Sanand. Subros has a technical collaboration with global leader Denso in automotive airconditioning.
* In Q2FY21, the company reported healthy set of numbers wherein revenue de-growth was restricted to 8% YoY, however, its net profit grew by 34% YoY.
* Subros growth prospects are highly dependent on PV industry as it gets ~90% of its revenue from this segment. The overall Passenger Vehicle (PV) industry has witnessed a sharp slowdown in the last one year due to muted consumer sentiments, increase in cost of vehicles, liquidity issues amongst NBFCs and lastly the COVID-19. However, with easing restrictions in the last few months, the demand for PVs have improved and the growth trajectory is likely to continue on the back of festive season, resilient demand in rural areas and increased preference towards personal mobility.
* Subros had an exceptional rally for nearly four years (during 2014-2018) after the breakout from a prolonged consolidation phase. The stock prices rose from roughly 40 mark to a record high of 414.94 levels during that phase.
* After the failed attempt to surpass the record high in September 2018, it gradually slipped lower initially and the trend finally changed to negative in the middle of 2019.
* It has been witnessing recovery for the last seven months and reached closer to the resistance zone of the declining trend line on the weekly chart. Also, it’s currently hovering in a narrow range of 230-270 zone and likely to see a breakout from the same shortly, which in turn would reverse the intermediate negative trend too. We thus advise buying at the current level (256.80) and adding more on dips around 245 with the close below stop loss of 220 for the target of 310.
Buy Subros Ltd @ 245-256.80 CMP 256.80 SL220 TGT 310
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