CMP: Rs 239.40
The company enjoys superior valuation compared to its peers as it has been consistently achieving high levels of profitability. Given the good long-term growth opportunities, impressive clientele, high-end product portfolio and sustained high OPM of over 14%, Automotive Axles, which caters to the commercial vehicle (CV) segment is a good long term investment pick. Though overall CV industry is under cyclical pressure, in long run the MAV (Multi Axle Vehicle), sub-segment is particularly on high growth trajectory and is fast substituting the MCV (Medium Commercial Vehicle) segment.

MAV growth is being driven by better cost economics. MAVs are more profitable than the ICVs and MCVs due to which the truck operators are shifting over to MAVs. Automotive Axles, by far the largest supplier (vis-a-vis competition) of tandom drive axles for the 6X4 MAVs, is expected to be one of the biggest beneficiaries of this structural shift to MAVs.

CMP: Rs 26
Subros prospects are derived largely from demand arising in the Passenger Vehicle (PV) segment, which is currently under pressure due to sluggish demand. This is reflected in Subros valuation too. However, newer growth opportunities are emerging for Subros, owing to increasing customer base on the back of investments by new OEMs entering Indian market. Subros is the market leader in the supply of AC systems to the Automobile OEMs with more than 40% market share.

Further with the advent of Tata Nano the market is moving towards producing low-cost high-quality automobiles. As the company enjoys an edge over its peers on back of its strong Order book and technological backing from its two foreign collaborators viz. Denso and Suzuki, the company is all set to grab this opportunity. We estimate Subros to register an EPS of Rs 5.2 in FY2009E and Rs 6.4 in FY2010E.