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Summary
of Contents
STOCK UPDATE
Subros
Cluster: Ugly
Duckling
Recommendation: Buy
Price target:
Rs370
Current market price: Rs214
Annual report review
We believe
Subros is a strong play on India's growing passenger car segment.
Going forward, a strong growth in the volumes of its major clients,
MUL and TAMO, and its efforts to expand its portfolio by supplying
to M&M will maintain the momentum in its earnings growth.
Further a sharp revival in the sales of small cars, particularly
those of MUL and TAMO (Subros is virtually the only supplier to
these OEMs), would beef up the volume growth. We remain positive on
the company's prospects and expect its earnings to grow at a healthy
compounded annual growth rate of 32% over FY2006-08. At the current
market price of Rs214, the stock is trading at compelling valuations
of 9x FY2007 earnings per share and 5.9x FY2008 earnings. It is
available at a huge discount to its peers. We maintain our Buy
recommendation on the stock with a price target of
Rs370.
VIEWPOINT
Essel Propack
Acquisition of
Packaging India
Essel Propack Ltd (EPL) has acquired a 100%
stake in the Chennai-based Packaging India Private Ltd (PIPL) from
the CavinKare group. PIPL was set up in 1990 to meet the captive
demand for flexible packing needs of the CavinKare group. It has a
state-of-the-art manufacturing facility at Pondicherry with the
average life of machines below three years. PIPL has a client base
of reputed names in the food product, personal care and detergent
segments.
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