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    Subros

    SUBROSGood
    Capital Goods·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

    9

    • 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.

    What Changed1

    vs Q4 FY25

    Guidance items8 → 19 (+11)
    Key financials

    Metrics

    8

    Periods

    2

    Headline

    7
    • 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%

    9M

    1
    • Revenue
      ₹2,459 Cr
      YoY+9.8%

    Segment breakdown

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

    Guidance & targets

    19
    CategoryTargetPriority
    Revenue Contribution
    Revenue from alternative fuels (CNG, hybrid, electric components)
    >20%
    		High
    Regulatory Mandate
    AC cabin mandate in N2, N3 categories
    October '25
    		High
    Capex
    Phase 1 investment in Kharkhoda
    approx INR150 crores
    		High
    Capex
    Regular maintenance and product development capex
    INR 100 crores to INR 125 crores
    		High
    Profitability
    EBITDA levels
    around 12%
    		Medium
    Product Content Value (EV)
    Kit content increase (e-Vitara vs normal Vitara)
    almost 1.8x delta
    		High
    Product Content Value (EV)
    Content per vehicle (ICE vs EV, excluding compressor)
    between 1.8x to 2x
    		High
    Product Content Value (EV)
    Content per vehicle (ICE vs EV, including compressor)
    around 2.5x to 3x
    		High
    Order Inflow (Railway)
    Railway tender business secured
    around INR 40 crores
    		High
    Product Content Value (Railway)
    Content per coach (2 units)
    roughly INR1.5 million to INR1.7 million
    		High
    Product Content Value (EV Bus)
    Content per EV bus AC kit
    around 4.5 lakhs
    		High
    Product Content Value (Truck AC)
    Kit value for smaller truck
    10,000 to 12,000
    		High
    Product Content Value (Truck AC)
    Kit value for middle-range truck
    12,000 to 14,000
    		High
    Product Content Value (Truck AC)
    Kit value for high-range truck
    14,000 to 16,000
    		High
    Capacity Expansion
    Capacity increase in existing plants
    10% to 12%
    		High
    Localization
    Import content as % of total revenue
    around 10%
    		High
    Revenue Mix
    Business from railway, buses, trucks, tractors segments
    more than 10% to 15%
    		High
    Greenfield Project
    Operational status of Kharkhoda plant
    operational
    		High
    Growth
    Company growth vs. industry growth
    better than that
    		High

    Risks & concerns

    6
    RiskSeverity

    Industry Shifts (EVs, alternative fuels)

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

    medium

    Foreign Exchange Fluctuations

    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

    low

    Highly Competitive Market (Home AC)

    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

    medium

    Unorganized Market (Refrigeration Trucks)

    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

    medium

    Industry Disruption / Economic Uncertainty

    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

    medium

    Areas of Evasion(1)

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

    Q&A highlights

    3

    “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

    3 min read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.