Concall AI

Subros Limited — Q3 FY25 earnings call

Call held 31 Jan 2025

Management summary

Subros reported a strong Q3 FY25, demonstrating double-digit revenue growth and significant margin expansion, primarily driven by aggressive localization and operational efficiencies. The company is strategically diversifying its revenue streams by focusing on the burgeoning EV, hybrid, CV, and railway segments, while also planning substantial capacity expansion with the new Kharkhoda plant. Management expressed high confidence in outperforming overall industry growth and achieving its 12% EBITDA margin target in the coming quarters.

Highlights

Revenue from operations for Q3 FY25 grew 12% YoY to INR 821 crores.
EBITDA for Q3 FY25 increased 21.91% YoY to INR 80.64 crores, achieving a 9.85% margin.
Profit Before Tax (PBT) for Q3 FY25 improved 35% YoY to INR 45.80 crores, with a 5.60% margin.
Profit After Tax (PAT) for Q3 FY25 rose 22% YoY to INR 32.84 crores, representing a 4.01% margin.
9-month revenue reached INR 2,459 crores, marking a 9.8% YTD growth.
The Commercial Vehicle (CV) segment showed robust growth of 26% in Q3, driven by new sectors and Aircon adoption in last-mile connectivity trucks.
Subros targets over 20% of its revenue from EV, hybrid, and alternative fuel components within the next 1-2 years.
An investment of approximately INR 150 crores has been approved for Phase 1 of the Kharkhoda greenfield project.
Localization efforts aim to reduce import content from 16-18% of total revenue to around 10% in the next 2-3 years.

Key financials

2 periods

Headline

Revenue
₹821 Cr
YoY +12%
EBITDA
₹80.64 Cr
YoY +21.9%
EBITDA Margin
9.8%
PBT
₹45.8 Cr
YoY +35%
PBT Margin
5.6%
PAT
₹32.84 Cr
YoY +22%
PAT Margin
4%

9M

Revenue
₹2,459 Cr
YoY +9.8%

What they filed

Q1 FY27: revenue up 17.5%, net profit up 2.4% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	828	821	908	878	880 +6%	948 +15%	1,050 +16%	1,032 +18%
Expenses	752	745	816	796	811	866	958	951
EBITDA	76	76	93	82	68 −11%	81 +7%	92 −1%	81 −1%
Margin	9%	9%	10%	9%	8%	9%	9%	8%
Other income	6	5	6	6	20	-2	8	6
Interest	2	3	3	2	2	3	2	3
Depreciation	32	32	34	31	31	32	31	29
Profit before tax	49	46	62	55	55 +12%	45 −2%	66 +6%	56 +2%
Tax rate	25%	28%	25%	25%	25%	22%	26%	26%
Net profit	36	33	46	41	41 +14%	35 +6%	49 +7%	42 +2%
EPS	5.58	5.05	7.08	6.26	6.25	5.33	7.56	6.36

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Passenger Vehicle
₹640 Cr Revenue
ECM (Radiator)
₹125 Cr Revenue
Trucks
₹30 Cr Revenue
Buses
₹10 Cr Revenue
CV Segment
26% Growth

Guidance & targets

Revenue Contribution

Revenue from alternative fuels (CNG, hybrid, electric components) Revenue Contribution · next 1 to 2 years · High confidence >20%

Our ongoing developments in alternative fuels, such as CNG, hybrid, electric components is expected to contribute more than 20% of our revenue in the next 1 to 2 years.

— MR. PARMOD KUMAR DUGGAL

Regulatory Mandate

AC cabin mandate in N2, N3 categories Regulatory Mandate · October 2025 · High confidence October '25

Further in line of new notification announced by the Ministry of Road and Transport, Heavy Industries, mandate of AC cabin in N2, N3 categories from October '25.

— MR. PARMOD KUMAR DUGGAL

Capex

Phase 1 investment in Kharkhoda Capex · as per plan as of now · High confidence approx INR150 crores

In Last quarter Board meeting, we have already taken approval of approx INR150 crores for Phase 1 investment in Kharkhoda, and we are as per plan as of now.

— MR. PARMOD KUMAR DUGGAL
Regular maintenance and product development capex Capex · FY '26 · High confidence INR 100 crores to INR 125 crores

So FY '26, we will be consistent in our regular capex that would be in the range of INR 100 crores to INR 125 crores, that would be our regular maintenance capex as well as for the product development, technology development.

— MR. PARMOD KUMAR DUGGAL

Profitability

EBITDA levels Profitability · a few quarters · Medium confidence around 12%

We have reached to almost 9.75% to 10% level. And going forward, it is going to improve because now all the characterization for sourcing, localization and also for the neutral impact on foreign exchange, to some extent, the negotiation with our customers has already been done. So we are very hopeful that this 12% level will be realizable, but it will take a few quarters.

— MR. PARMOD KUMAR DUGGAL

Product Content Value (EV)

Kit content increase (e-Vitara vs normal Vitara) Product Content Value (EV) · first quarter of FY '25-'26 · High confidence almost 1.8x delta

So the kit content as against to e Vitara normal to this, there would be almost 1.8x delta, which will be coming in. The timing of launch customer has not been still officially announced, but we are expecting that this would be in the first quarter of FY '25-'26.

— MR. PARMOD KUMAR DUGGAL
Content per vehicle (ICE vs EV, excluding compressor) Product Content Value (EV) · High confidence between 1.8x to 2x

On second question, as I mentioned, other than compressor, the content per vehicle minus compressor, ICE engine versus EV engine, would be between 1.8x to 2x because of the scope increase of frozen pipe going up to the battery cooling, also because of the brushless motors and some technology upgradation for EV.

— MR. PARMOD KUMAR DUGGAL
Content per vehicle (ICE vs EV, including compressor) Product Content Value (EV) · High confidence around 2.5x to 3x

So overall, between ICE to EV would be around 2.5x to 3x of content per vehicle.

— MR. PARMOD KUMAR DUGGAL

Order Inflow (Railway)

Railway tender business secured Order Inflow (Railway) · balance will be in quarter 4 and quarter 1 of the next year · High confidence around INR 40 crores

Now we had secured a large tender of railway, which is around INR 40 crores of business. Out of that, we have already serviced around INR 7 crores, and the balance will be in quarter 4 and quarter 1 of the next year.

— MR. PARMOD KUMAR DUGGAL

Product Content Value (Railway)

Content per coach (2 units) Product Content Value (Railway) · High confidence roughly INR1.5 million to INR1.7 million

So normally per coach, there are 2 units required to be supplied, which is roughly INR1.5 million to INR1.7 million. This is in this range.

— MR. PARMOD KUMAR DUGGAL

Product Content Value (EV Bus)

Content per EV bus AC kit Product Content Value (EV Bus) · High confidence around 4.5 lakhs

So if normal ICE AC kit is around, say, INR 4 lakhs, it would be around 4.5 lakhs. So impact will be max 10% on the base.

— MR. PARMOD KUMAR DUGGAL

Product Content Value (Truck AC)

Kit value for smaller truck Product Content Value (Truck AC) · High confidence 10,000 to 12,000

So it ranged between around 10,000 to 12,000 for a smaller truck between 12 to 14 middle-range truck and between 14,000 to 16,000 for high-range truck.

— MR. PARMOD KUMAR DUGGAL
Kit value for middle-range truck Product Content Value (Truck AC) · High confidence 12,000 to 14,000

— MR. PARMOD KUMAR DUGGAL
Kit value for high-range truck Product Content Value (Truck AC) · High confidence 14,000 to 16,000

— MR. PARMOD KUMAR DUGGAL

Capacity Expansion

Capacity increase in existing plants Capacity Expansion · High confidence 10% to 12%

Some improvement will happen through the bottleneck machines, where we can increase 10% to 12% capacities in the existing plant.

— MR. PARMOD KUMAR DUGGAL

Localization

Import content as % of total revenue Localization · next 2 to 3 years · High confidence around 10%

From 16% to 18% today

So right now, the import content is roughly in the range of 16% to 18% of the total revenue. So that's where we are right now, and our target is to bring it to around 10% in next 2 to 3 years' time. We are consistent on our actions.

— MR. PARMOD KUMAR DUGGAL

Revenue Mix

Business from railway, buses, trucks, tractors segments Revenue Mix · next 3 to 5 years · High confidence more than 10% to 15%

So next 3 to 5 years, we want more than 10% to 15% business coming from these segments so that the dependency on passenger vehicle segment should be lesser from the current level because these all segments are very destructively moving year-on-year.

— MR. PARMOD KUMAR DUGGAL

Greenfield Project

Operational status of Kharkhoda plant Greenfield Project · somewhere middle of FY '26, '27 · High confidence operational

So that plant would be operational in somewhere middle of FY '26, '27.

— MR. PARMOD KUMAR DUGGAL

Growth

Company growth vs. industry growth Growth · even FY '26 · High confidence better than that

So it would be very difficult to give a very precise number, but one thing, which I'm maintaining for last 3 years in all the investor calls, and I still maintain that, that whatever will be the industry growth, we will do better than that. So Subros growth in even FY '26 also will be better than the industry growth.

— MR. PARMOD KUMAR DUGGAL

Risks & concerns

Industry Shifts (EVs, alternative fuels)
medium

Management acknowledged the industry shifts towards EVs and alternative fuels as both crucial and challenging, requiring continuous innovation.

Management acknowledged
Highly Competitive Market (Home AC)
medium

The Home AC business faces a very high competitive market and commodity impact, leading Subros to slow down and focus only on segments with reasonable margins.

Management acknowledged
Unorganized Market (Refrigeration Trucks)
medium

The refrigeration truck market is largely unorganized (bodybuilder shops), posing a challenge for OE-fitted kits, though management is hopeful for future growth and standardization.

Management acknowledged
Industry Disruption / Economic Uncertainty
medium

Management expressed a need to be watchful regarding potential industry disruption, trade/tariff wars, and awaiting post-budget clarity for the next year's growth outlook.

Management acknowledged
Foreign Exchange Fluctuations
low

Q3 saw an adverse currency impact, but management stated that prudent hedging and customer rate adjustments are expected to result in a positive impact in Q4.

Management acknowledged

Areas of evasion (1)

Specific OEM names for POCs (Proof of Concepts) in the EV bus segment, citing confidentiality.

Q&A highlights

3 direct

EBITDA Margin Improvement Journey and Recent Performance Direct

We have reached to almost 9.75% to 10% level. And going forward, it is going to improve because now all the characterization for sourcing, localization and also for the neutral impact on foreign exchange, to some extent, the negotiation with our customers has already been done. So we are very hopeful that this 12% level will be realizable, but it will take a few quarters.

This question directly addressed the company's core profitability target and the factors driving its achievement, including localization and foreign exchange management.

Asked by Mayur Parkeria

EV Vitara Launch, Kit Value, and Import Content for EV Components Direct

So the kit content as against to e Vitara normal to this, there would be almost 1.8x delta... Overall, between ICE to EV would be around 2.5x to 3x of content per vehicle... There would be slightly increase in the import content, minus compressor, because all other components are more or less extension of the scope, not on the component side. So it will be mostly localized.

This provided crucial quantitative insight into the revenue potential from new EV models and clarified the localization strategy for these advanced components, impacting future margins.

Asked by Mitul Shah

Localization Rate and Target for Import Content Reduction Direct

So right now, the import content is roughly in the range of 16% to 18% of the total revenue. So that's where we are right now, and our target is to bring it to around 10% in next 2 to 3 years' time. We are consistent on our actions.

This question clarified the current level of import dependency and provided a specific, measurable target for localization, which is a key driver for the company's stated margin improvement goals.

Asked by Khusha

3 min read 6 chapters

Detailed narrative

Q3 FY25 Performance and Margin Expansion

Subros delivered a strong Q3 FY25, with revenue from operations growing 12% YoY to INR 821 crores. This performance was accompanied by significant margin expansion, as EBITDA increased 21.91% YoY to INR 80.64 crores, achieving a 9.85% margin. PBT improved by 35% to INR 45.80 crores (5.60% margin), and PAT grew 22% to INR 32.84 crores (4.01% margin). The management attributed this robust performance to aggressive localization efforts and improved internal efficiencies.

Strategic Diversification and Segment Growth

The company is actively diversifying its revenue mix, with the Commercial Vehicle (CV) segment playing a crucial role, growing 26% in Q3 due to new emerging sectors and the introduction of Aircon in last-mile connectivity trucks. Current Q3 revenue mix includes INR 640 crores from passenger vehicles, INR 125 crores from ECM/radiators, INR 30 crores from trucks, and INR 10 crores from buses. Subros aims for non-PV segments to contribute over 10-15% of business in the next 3-5 years, reducing dependency on the passenger vehicle segment.

Transition to EV and Hybrid Vehicles

Subros is making significant strides in the EV and hybrid vehicle space, with ongoing product developments for major customers. The company expects alternative fuels (CNG, hybrid, electric) to contribute over 20% of its revenue in the next 1-2 years. For the upcoming e-Vitara, the kit content value is projected to be almost 1.8x higher than the normal Vitara, and overall ICE to EV content per vehicle could be 2.5x to 3x, including the compressor, indicating substantial revenue potential.

Kharkhoda Expansion and Capex Plans

To support future growth and capacity needs, Subros has approved an investment of approximately INR 150 crores for Phase 1 of its Kharkhoda greenfield project, with construction set to begin soon. This new facility is expected to be operational by mid-FY26 or FY27. Additionally, the company plans a regular annual capex of INR 100-125 crores for FY26, covering maintenance, product development, and technology upgrades, alongside a 10-12% capacity increase in existing plants through bottleneck improvements.

Localization and Efficiency Drive

A key strategic pillar for Subros is aggressive localization and cost cutting. The company aims to reduce its import content from the current 16-18% of total revenue to around 10% within the next 2-3 years. This focus on sourcing optimization and internal efficiency is expected to further improve gross margins and contribute to achieving the targeted 12% EBITDA margin in the coming quarters, enhancing overall competitiveness.

New Opportunities in Railways and Commercial Vehicles

Subros is aggressively pursuing opportunities in the railway sector, having secured a large tender worth INR 40 crores, with INR 7 crores already serviced, and aims for more in Q2/Q3 next year. The content per railway coach (for 2 AC units) is valued at INR 1.5-1.7 million. In the commercial vehicle segment, the upcoming mandate for AC cabins in N2 and N3 categories from October '25 is expected to provide a substantial growth impetus, with truck AC kit values ranging from INR 10,000 to INR 16,000 depending on the truck size.

This is an AI-generated summary of a publicly available earnings call transcript.

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