Subros LtdQ2 FY24Industrial Products

Subros Ltd

Q2 FY24 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

Yes

Capex

Yes

2 of 4 growth signals are positive.

Revenue guidance

Category 3

→Subros expects double-digit revenue growth in the next year, subject to economic and geopolitical conditions post-elections.
→For FY '26 and '27, the company aims to outperform industry growth, targeting double-digit growth compared to the industry’s estimated 6%-8%.
→New technology adoption, especially related to EVs, hybrids, and thermal products, is expected to contribute significantly to revenue growth from 2026 onwards through 2031.
→The company has a strong order book (~Rs. 1,000 crores over two years) which will translate to revenues in the near term, though partly from replacement and model changeover business.
→Subros is expanding into EV-related components, with some products expected to start production next year; however, major investment decisions, particularly for electric compressors, await clearer EV market growth.
→The company aims to sustain growth with existing and new customers, including Mahindra & Mahindra and Maruti Suzuki, for hybrid and EV models.

Category 3

→Subros expects double-digit revenue growth in the next year, contingent on geopolitical and economic stability post-elections.
→The company aims to exceed overall industry growth, targeting 6-8% growth in FY26-27, with ambitions for double-digit growth for these years.
→New technologies and EV products are expected to substantially contribute to revenue from FY26-27 onwards.
→EBITDA margins target is to break the 10% level soon, with efforts to eventually return to 11-12% margins seen in 2015-2017.
→Profitability has shown a strong recovery with a 43% YoY EBITDA increase and 103% PAT growth in FY24.
→Continued margin improvement driven by cost reduction, operational efficiencies, and easing commodity prices.
→CAPEX focused on incremental capacity and selective new technology investments to support 8-10% growth sustainably.
→The company remains cautious on investments in EV compressors, pending clearer market ramp-up signals.

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→The company is currently debt-free with no long-term borrowings on the books of accounts.
→There is no mention of any ongoing or planned new fundraising through debt or equity in the call.
→The focus is on sustaining and generating positive cash flow without relying on additional borrowing.
→Capital expenditure is planned around ₹100+ crores annually for incremental capacity and technology investments, funded internally.
→Any large technology investments, particularly for electric compressors, will be evaluated carefully based on EV market ramp-up before committing funds.
→No clear indication of external funding (debt/equity) is planned in the near future as per the management discussion.

Yes

→Subros Limited booked orders worth around ₹475 crores in FY '23-'24 and ₹530 crores in the previous year.
→The total order book is approximately ₹1,000 crores spread across various customers and segments.
→The typical development to start-of-production (SOP) cycle is between 12 to 18 months.
→Not all of the ₹1,000 crores will translate into incremental revenue as some orders correspond to model changeovers or replacement business.
→For Mahindra, Subros has secured new business including BEV components and full systems for specific models, with SOP starting from September onwards.
→Orders for EV bus HVAC systems are approaching conclusion with large customers, with order booking expected in the second half of the year.
→Localization efforts and new product technologies will contribute to future order inflows, targeting growth beyond industry levels by 2026-27.

Yes

→Current annual CAPEX is around Rs. 100-120 crore, mainly for sustaining and incremental capacity expansion, such as de-bottlenecking operations.
→Large greenfield infrastructure investments were completed about three years ago; current CAPEX does not include major new facilities.
→Additional CAPEX will be required for new technology investments, particularly for EV-related products.
→Electric compressor localization investment is at the feasibility stage; the company is cautious due to high investment and uncertain EV market ramp-up.
→Further strategic investments depend on the pace of EV penetration, expected ramp-up beyond FY '26-'27.
→CAPEX related to new technologies (hose and pipe for battery cooling, hybrid condensers/radiators, compressors) will be pursued as market potential becomes clearer.
→No specific investment quantum is disclosed yet; announcements will be made in future calls based on market developments.

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