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No Brake in Growth

Wabco India is a pioneer in the manufacturing of air-assisted & air-brake systems. Find out if you should invest in it

  • Parent is global market leader of anti-lock braking systems
  • Wabco India has captured around 85 per cent of air-brake market for CV's in India
  • Strong export has blunt impact of domestic slowdown
  • Among the highest ROCE in the industry without any debt

Why invest?
Wabco India, a subsidiary of Wabco Holdings Inc, has pioneered the manufacture of air-assisted and air brake systems for commercial vehicles. The company is a leader in both the OE (Original Equipment) market and in the aftermarket sector for medium and heavy commercial vehicles (M&HCVs).

M&HCVs have been particularly hard hit in the ongoing industry slump. Wabco's revenues hit the slow lane too with revenues growing by only six per cent annually in the last three years.

What's helped Wabco ride out the slowdown in the domestic commercial vehicle sector has been the strong growth in exports. From ₹55 crore levels in FY10, exports are expected to top at ₹400 crore in FY14 (ICICI estimates). The share of exports has risen sharply from 9 per cent (FY10) to around 40 per cent. Watch out for any improvement in the investment cycle which is a precursor for any pick-up in commercial vehicle sales. With Wabco cornering 85 per cent of the domestic ABS market, any turnaround will accrue to it.

Caution: Keep an eye on valuations as the recent run-up has stretched them.