Subros

Subros Limited reported a robust Q3 FY26, with revenue growing 15.43% year-on-year to INR 948 crores. EBITDA for the quarter stood at INR 87.19 crores, reflecting an 8.13% growth, though the EBITDA margin was 9.23%. Profit Before Tax (PBT) increased by 15.17% to INR 52.75 crores, and Profit After Tax (PAT) grew 6.08% to INR 34.84 crores, despite an exceptional item^📎 booking of INR 8.08 crores for gratuity and leave encashment.

The company announced a significant strategic move towards localizing e-compressors for EV and hybrid vehicles, securing business from Maruti Suzuki for future models planned for 2027-2029. An initial investment of INR 175 crores is earmarked for the first phase of this localization at the Karsanpura plant, targeting an initial capacity of 400,000 units with Start of Production (SOP) by December 2027. This facility is projected to eventually scale up annual revenue to INR 600-700 crores. Additionally, 0.5 million units of fixed displacement compressor capacity will be set up in Gujarat.

The Commercial Vehicle (CV) segment demonstrated exceptional growth, recording a 136% increase in revenue during Q3 FY26, primarily driven by the mandatory AC N2 and N3 categories. The company's market share in the truck AC market remained strong at 42%. Management noted that the full-year impact of the N2/N3 mandate, which significantly increases content per vehicle (4x), will be realized in the next fiscal year as the current year's impact was limited to four months.

Despite overall growth, EBITDA margins faced compression, declining to 9.23% from 9.85% in the corresponding quarter. This was attributed to volatility in commodity prices (aluminum, copper, PP, steel) and foreign exchange rates, which resulted in a 0.5-0.75% quarter-on-quarter impact. Management indicated that while efforts are ongoing for cost optimization, full margin recovery is contingent on market stabilization. The company's long-term aspiration for a 12% margin has been pushed back by at least a year due to these external factors.

Subros maintained a strong 41% market share in the passenger vehicle thermal market during the quarter. The company is actively expanding its business with existing customers, notably increasing its presence with Mahindra. Subros has secured 2-3 new platforms with Mahindra for future models, with SOP expected from next year onwards, including involvement in Mahindra's EV segment for selective components across all three platforms.

The railway business continues to be a strong growth vertical, with Subros bagging a INR 52 crores tender for annual maintenance contracts for railway AC installations, to be executed over the next three years. The company is also participating in tenders for Vande Bharat. Management acknowledged geopolitical tensions as a potential risk, which could impact supply chain volatility, cost pressures, freight costs, and delivery timelines, and is preparing mitigation strategies.