The Wabco India stock touched its 52-week high of ₹3,569.9 today. The company is a leading manufacturer of air and air-assisted brake systems for commercial vehicles. The stock has gained over 90 per cent, since September 2013, reflecting investor interest in cyclical stocks during this rally.

Besides brake systems, the company has entered into new product lines such as air compressors, electronically-controlled air suspension systems and anti-lock braking systems (ABS) in the last few years. The immediate trigger for today’s rally is a notification from the government that ABS is compulsory for all new models of commercial vehicles beginning April 2015. Besides, manufacturers will get six months time to fit ABS on new vehicles sold under the existing models. ABS is used to prevent the wheels from locking while braking at turns and high speeds. This helps prevent skidding too.

Mandating ABS presents a huge growth opportunity for Wabco India, at a time when commercial vehicle sales is on the cusp of an upturn. The company currently derives 10 per cent of its revenues from this product. Moreover, ABS is also a high margin product. This will help the company’s operating margins expand further from the current 20 per cent levels. Hence mandating implementation of ABS could be a key game changer for the company and provide significant upsides to the company’s revenues and earnings.