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Dolat Capital Report
Subros Ltd. displayed a weak margin performance led by negative operating leverage and an increase in employee cost. Despite a 9% revenue growth in passenger vehicles revenue de-grew of 2% YoY led by sharp fall in home AC segment (Rs 22 million only versus 690 million in Q1 FY23).
Subros' Ebitda margin stood at 6.82% (flat QoQ).
Government's recent announcement to make ACs mandatory in commercial vehicles from January 2025 will create a market opportunity for Rs 4-4.50 billion from FY26.
We maintain a positive stance on the stock led by-
premiumisation and an upbeat outlook for in passenger vehicles segment,
increase in content per vehicle due to electrification,
rapid acceleration of E-buses and new verticals,
sharp margin expansion due to fall in raw material and logistics cost and
incremental revenue opportunity due to mandatory AC in CVs.
We value the stock Rs 463 (based on 20 times FY26 earnings per share). Recommend 'Accumulate'.
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