>SUBROS (TECNO GROUP)

Subros manufactures and supplies automotive air-conditioning systems and heaters & blowers and is a market leader with ~ 40% market share in the PV ac market. The volumes growth for FY10 is approximately 20%+. We expect the company to grow topline at 15%+ over the next two years driven by healthy volumes growth on account of diversification of segments and launch of new models.

The company has in all 5 manufacturing plants – 3 in Noida and 1 each in Pune and Manesar. In FY09 the capacity was at 750,000 AC kits. The company’s new plant at Sanand Gujarat is expected to go on stream to supply AC kits for the prestigious Tata Nano. With this along with
brownfield expansion the company is ramping up capacity to 1,000,000 AC kits. The new capacity is expected to be operational from FY11. Volumes have grown at 20%+ for the last two years. We expect the volumes growth to be in the range of 15%+ over the next two years on the back of a slew of new model launches as well as the company’s efforts to increase presence in other Auto segment’s. Subros is dependent primarily on the domestic OEM’s and is hence resilient on the demand side when it comes to the global crisis.

We believe that as the domestic auto industry saw a shift from two-wheelers to four wheeler, similarly the heavy and medium commercial segment will see a tilt toward more luxury amenities such as airconditioning. In-line with developed nations trends India’s road public transport as well as heavy goods carrier are seeing large shift of preference for air-conditioning. Starbuses are one such example. Tata Motors & Ashok Leyland are working on concepts of air-conditioned CV’s which is expected to be commercialized over the next 2-3 years.

To read the full report: SUBROS