Subros Q3 Results Review - Positives Priced In: Dolat Capital

Dolat Capital Report

Subros Ltd.'s printed a decent set of numbers in Q3. Revenue de-grew 9.9% QoQ due to fall in production in private vehicle. Despite negative operating leverage the company was able maintain Ebitda margin above 8% due to expansion in gross margin. Management expresses its confidence to attain a double digit margin in FY25.

In the private vehicle segment, the company outperformed industry growth due to model mix (12% growth in Q3 versus industry growth of 5%). Increase in market share in SUV by Maruti Suzuki India Ltd,, new business from Mahindra & Mahindra Ltd. and other original equipment manufacturer would be key catalysts for Subros PVs AC growth.

Government's recent announcement to make ACs mandatory in CVs from January 2025 will create a market opportunity for Rs 4-4.50 billion from FY26.

Most of the positives have been already priced in, stock is trading at 32/25 times of FY25E/26E earning per share, which looks expensive.

Recommend Sell with target price of Rs 634 (based on 22 times FY26 EPS).

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