Subros Ltd (SUBROS) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (361 Capital Market Private Limited): Ladies and gentlemen, good day, and welcome to Subros Limited Q2 FY '27 post-result earnings conference call hosted by 361 Capital Market Private Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Annamalai Jayaraj from 361 Capital Market Private Limited. Thank you, and over to you, sir.
Annamalai Jayaraj (361 Capital Market Private Limited): Thanks, madam. Welcome, all of the participants to Subros Limited 2Q FY '27 post-results conference call. From Subros management, we have with us today Mr. Pramod Kumar Duggal, Executive Director and Chief Executive Officer; Mr. Hemant Kumar Agarwal, Chief Financial Officer and Senior Vice President, Finance; and Mr. Sukhwinder Singh Gill, Vice President, Finance. I'll now hand over the call to Mr. Pramod Kumar Duggal, CEO, for the opening remarks. Then we'll go for Q&A session. Over to you, sir.
Pramod Kumar Duggal (Subros Ltd): Thank you, Mr. Jayaraj. Good morning, ladies and gentlemen. Very warm welcome to all of you on investor call of Subros Limited for quarter two financial year '26-'27. Let me begin by reflecting the performance of Indian automotive industry and opportunities that lies ahead for Subros. The Indian automotive industry has delivered a strong performance during quarter two of this fiscal year. Domestic sale across all four four major vehicle segment, passenger vehicle, two-wheeler, three-wheeler, and commercial vehicle has grown by 18.2% with a record sale of 83.88 lakhs. Export has also grown by 23.9%, which is quite encouraging. The growth has been supported by improved affordability following GST 2.0, resilient rural and urban demand, new vehicle launches, financing availability, and a gradual replacement cycle. The outlook for the second half of the financial year also remain encouraging,
Pramod Kumar Duggal (Subros Ltd): political uncertainty, commodity price volatility, logistic disruptions, inflationary pressures continued to be there in last six months, which is impacting margin significantly. We have achieved as Subros a strong growth of 36.26% during the quarter, reflecting a robust customer demand and our ability to support the growing requirement of automotive industry. However, the profitability continue to remain under pressure due to significant cost escalation due to geopolitical situations, higher input cost and energy cost and increased wages and logistics expenses. The company has reported a revenue from operation 1,198.90 crores during quarter two, representing a growth of 36.26% over a part over corresponding quarter of the last year. Our market position continue to remain strong. Our share of business in passenger vehicle market stood at 41%. Truck AC market, it has improved to 43% and bus AC segment stood at 16% during the quarter. EBITDA for quarter two of FY '26 '27 stood at 91.49 crore as against 87.98 crores in the corresponding quarter. Though in absolute term, there is a improvement of 5.17%. However, in a percentage term, there is a dip of 2.38% as compared to the corresponding quarter. The major impact is due to the commodity, Forex and logistics cost escalation, which are not fully reimbursable through pricing. There is a quarter lag in in terms of commodity compensation, which is also impacting adversely into EBITDA. Additionally, in the last year, there was one element of income 1.52%, which was reimbursement of incentive from the Gujarat Government, which was accounted for last year. Same way, the profit before tax is 59.96 crores as against 54.49 crores, which has a growth of 10% in absolute term. While the profit after tax stood at 44.64 crores as against 40.59 crores, again which is a 10% growth in absolute terms as compared to the corresponding period. Our non-passenger vehicle diversification strategy also yielding encouraging results. During the quarter, the commercial vehicle business has grown by 54% and bus AC business has grown by 64%. Let me now update you on the ongoing expansion project. Recently we have advanced two key strategic initiative to strengthen Subros's long-term growth prospects. Subros has inaugurated Subros Advanced Technology and Innovation Center, static, to enhance our engineering capability, innovation and material research and position us to capture emerging opportunities in electric mobility and advanced thermal management products. We have also commenced our operation to soft launch in our Karkhoda plant. Subros Karkhoda is a state of art plant with a green building and more automation and digitalization level as compared to our existing plants. We are strengthening our ability to support customer programs closer to their manufacturing location. The priority now is to ramp up the operational efficiency, stabilize processes and achieve planned capacity utilization as quick as possible. These investments will expand our manufacturing capacity, strengthen customer proximity and support future business growth with a focus on efficient capacity utilization and sustainable return on capital.
Pramod Kumar Duggal (Subros Ltd): quarter of the last year in absolute terms. That's all from my side. We are happy to take questions now.
Moderator (361 Capital Market Private Limited): Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Prakash Kapadia from Ansec. Please go ahead.
Prakash Kapadia (Ansec): Yeah. Thanks for the opportunity. You know, our EBITDA margins are at 7% at a 13-14 quarter low. In the PPT you mentioned, you know, elevated raw material prices and product mix change leading to this, you know, RM cost increase of nearly 300 bps. So can you explain, you know, the product mix change better and, you know, from a gross margin perspective can you give us some sense on, you know, the current mix of passenger vehicles, railways, e-compressors, truck ACs and what is likely to be in the near term? So, you know, we can get some better clarity on the product mix change impact of the gross margin. And, secondly, you know, from an understanding perspective, is aluminium the largest component followed by copper and steel at RM and these would be what around 70% of our raw material cost? Is that fair understanding? And, you know, lastly, given these elevated prices, is, you know, high single digit the best case scenario in the near term? I'm not looking at a guidance, but a direction. Those were my questions. Thank you.
Pramod Kumar Duggal (Subros Ltd): Thank you Prakash ji, you had three questions. I'll answer one by one. First of all, we need to understand the cost composition. How commodities are used in our products. So the largest contribution of the product in terms of commodity is plastic, aluminium, copper and steel. There are the four commodities which are being used for our products. So, during last two quarters starting from February onwards, all these four are right now at the peak. The second element which is impacting the manufacturing efficiency in terms of margins or operational cost is the use of PNG, LPG, helium. So these are the gases which are used for converting products or the process during the process, they are also at the peak. The the increase in the terms of 200 to 300%. And the third major contributor is the logistics cost which is impacting our import landed cost which has increased, especially from China and Japan sector, almost 200 to 300%. So, these are the three major reason where the cost escalation has come. Now, for certain commodities, to the level of net weight delivered to the customer, they are compensable by the customer, but with a quarter lag, that means quarter two impact will come returned back to us in quarter three, provided we are not into the next peak in quarter three.
Prakash Kapadia (Ansec): Yeah.
Pramod Kumar Duggal (Subros Ltd): The second part which you asked us is about the product mix impact. So as I mentioned before, there's a overall growth of 36% by by Subros and all OEMs are right now running at the peak and we are almost running to our 100% of capacity. The compromise on servicing the OEM without disturbing their line is on the aftermarket sales. And that's how we are, the margins have been compromised because aftermarket sales gives better margin, but we had to service OEM's during this period, so there was no choice then to do that. And the third product which you did mention, the third question which you did mention about the elevated prices impact on the margin so and so. So as the situation will normalize, because if you compare quarter four results of last year versus quarter one and quarter two, the only element where the impact is negative is on the material cost only. Other heads, operating cost and all other elements are are on a positive trend. So till the time this geopolitical situation is stabilized or we have one-time settlement with customer for all the cost escalation as intermediate solution, I think we need to wait for another maybe two quarters to settle all these things.
Pramod Kumar Duggal (Subros Ltd): normal performance.
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