Subros Ltd Rs 800
Subros is a joint venture between the Suri Group (37%), Denso (20%), and Suzuki (12%), and has long been the dominant supplier of thermal products—ACs and heaters—to the Indian passenger vehicle (PV) market. Its deep collaboration with Denso ensures access to global tech, but its fate is largely tied to India’s auto industry, especially Maruti Suzuki, which contributes over 70% of Subros’ revenues.
As of FY25, Subros commands a ~42% share of the PV thermal market and a similar share in the commercial vehicle (CV) blower & AC space. That’s a high base, and incremental market share gains here seem unlikely. Growth will mostly mirror underlying PV industry growth, pegged at 6–8% going forward.
Over the last decade, Subros has grown revenues at 12% CAGR and profits at 19% CAGR, with ROE of 11%—good but not extraordinary. This, despite the structural shift from non-AC to AC vehicles in India, suggests much of the easy growth is already captured.
But here’s where things get interesting.
New Growth Triggers: EV & CV Transitions
- Mandatory truck AC norms (effective June 2025) open up a ₹400–450 crore market opportunity. If Subros captures 50% share, that’s ₹200 crore—translating to 6–7% sales upside on its FY25 topline (~₹3400 crore). This is a near-term kicker.
- Electric and hybrid vehicles require significantly more thermal management—cooling not just for the cabin, but also for the battery. Subros’ billing per EV is ~1.5–1.8x that of ICE vehicles. With EV plus Hybrids currently 5% of PV market, and assuming a 4% annual shift from ICE to EVs, this could add another ~2.4% annual topline growth.
- Longer-term optionalities like growth in railways (albeit small currently at ₹17 crore) and revival of home ACs (if the company reconsiders its defocus) remain distant, but supportive.
Risks and Dampeners
- Crude oil and forex volatility hurt margins due to plastic-heavy raw materials.
- PV market cyclicality and short-term softness in EV production due to rare metal export curbs by China may weigh on near-term performance.
- The defocus on home AC space, despite booming demand, is a bit of a missed opportunity.
Valuation and Return Expectations
At a PE of 34x, Subros is trading at the lower end of its historical range. Assuming 12% EPS growth (driven by ~10–12% sales growth and improving EBITDA margins from 10% to 12%), and a stable exit multiple, investors can expect low double-digit returns—broadly in line with earnings growth.
Bottom Line:
Subros is a defensive auto ancilliary bet with a steady base in PVs and clear short-to-medium term tailwinds from CV AC mandates and EV transition. While market share gains are unlikely, volume-led growth plus margin expansion can drive consistent earnings.
Perhaps not a multibagger, but a low-volatility, moderate-return compounder—best suited for investors seeking stability with an eye on evolving EV/CV trends.