Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Subros Ltd (BOM:517168, Financial) achieved a revenue of 828 crores during the quarter, with a growth of 1.8%.
- The company reported a significant improvement in quarterly profitability, with a 16.8% increase.
- Subros Ltd has maintained a strong market share, with 43% in the passenger vehicle segment and 51% in the truck segment.
- The company remains debt-free in terms of long-term borrowing, allowing for healthier cash generation.
- Subros Ltd received prestigious awards from Mahindra and Mahindra Tractor Division and Daimler trucks for their collaborative efforts.
Negative Points
- The domestic market growth was modest at 0.5% in the first half of the year, below initial expectations.
- There was a muted demand in the domestic market, impacting overall growth in the industry.
- The passenger vehicle industry experienced slower than expected growth, with a degrowth of 0.7% in quarter two.
- Supply chain disruptions and logistic delays are ongoing, affecting the business environment.
- Working capital requirements increased, leading to slightly negative free cash flows in H1.
Q & A Highlights
Q: Can you provide an outlook for the passenger vehicle industry in the second half and any new model wins this quarter?
A: It's challenging to predict H2 due to the muted growth in H1. No new models are expected in H2 as OEMs are focusing on the Bharat Mobility Show in January. We secured new business worth 121 crores, but SOPs are mostly in FY26. H2 is expected to be similar to H1 in terms of industry performance. - Pramod Duggal, CEO
Q: What is the current import content percentage, and how is the localization strategy progressing?
A: Our import content is around 16% of total turnover, with a target to reduce it to below 10% in the next 2-3 years. We have significantly reduced it from 42% over the past 6-7 years. - Pramod Duggal, CEO
Q: Do you foresee the margin improvement journey continuing despite the mixed outlook for H2?
A: We aim to sustain margins, but improvement depends on economic conditions and foreign exchange impacts. Our focus on operational efficiencies remains consistent. - Pramod Duggal, CEO
Q: Can you elaborate on the current revenue from the railway segment and future targets?
A: We've generated around 7 crores in H1 from railways, with an order book of 35-40 crores. We expect double-digit growth in this segment over the next 2-3 years. Margins are comparable to existing business but have potential to improve as scale increases. - Pramod Duggal, CEO
Q: What is the status of the electric vehicle (EV) market penetration and plans for electric compressor localization?
A: EV penetration is currently low, around 1%. We are cautious about setting up a compressor line due to potential idle capacity. The cost of such a facility would be between 90 to 120 crores. We will expedite localization efforts as market opportunities increase. - Pramod Duggal, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
