Accumulate Subros; target of Rs 237: Dolat Capital

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26 Aug, 2025 12:21

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Dolat Capital's research report on Subros

Subros reported weak performance in Q1FY21, impacted by slowdown in PV segment and the nationwide lockdown. Revenue de-grew 87% YoY to Rs 738mn (vs est Rs 1.4bn). EBITDA turned negative to Rs 299mn (vs est Rs 115mn) due to negative operating leverage. Production in Q1 was equivalent to two weeks of regular working days. Management stated that the production is gradually ramping up and now back to 75% of pre-Covid levels. However, system inventory which was piled up due to lockdown to be liquidated in Q2. At present, Subros has Rs 2.4bn worth of inventory (vs normal inventory of Rs 1.9bn). Gross debt has increased to Rs 2.4bn as of Q1 end (vs Rs 1.12bn at the end of FY20), due to increase in short term debt. The management expects it to be back to FY20 levels by end of the year. Major capex has been incurred and the company is likely to incur a capex of Rs 500-600mn in FY21. We expect the company to be a key beneficiary of recovery in the PV segment and market share gain by MSIL owing to increasing preference for low-end entry-level cars. MSIL accounts for ~70% of revenue for Subros.

Outlook

Given the expected recovery in PV sales from Q2FY21 onwards, incremental revenue from new business verticals, reduction in interest cost, and benefit from the lower corporate tax rate, we estimate Subros to potentially report a PAT CAGR of 16% over FY20-FY23E. We value the stock at Rs 237 (based on 18x FY23E EPS). Recommend Accumulate.

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