Subros up 18%, hits new high on order wins of Rs 25 cr from Indian Railways

Shares of Subros hit a new high of Rs 530, as they surged 18 per cent on the BSE in Monday’s intra-day trade on heavy volumes after winning Rs 25 crore orders from the Indian Railways.

The stock of auto components & equipment company was quoting 13 per cent higher at Rs 510, as compared to 0.17 per cent gain in the S&P BSE Sensex in morning trade. The average trading volumes on the counter jumped over four-fold with a combined around 1.9 million equity shares - representing 2.9 per cent of total equity of Subros - changing hands on the NSE and BSE.

In an exchange filing, the company said it has bagged new orders from Indian Railways for supply and commissioning of Coach Roof Mounted Air-Conditioners amounting to Rs 25 crore (approx.) in a recently concluded tender.

The Company is already a supplier of Rail Driver Cabin Air-Conditioning System to Indian Railways and the focus on Coach Air-Conditioners is in line with its strategic direction to expand Company’s business in Railway Electric Mobility Segment, the company said.

"Subros is the key auto-ancillary player which is seen as a beneficiary of this move; however, its stock price had already witnessed an uptick consequent to this announcement sometime in June 2023. At the CMP, the stock trades expensive given its muted margins as well as return ratios profile," ICICI Securities said in a recent note.

Subros is the leading manufacturer of thermal products for automotiveapplications in India, in technical collaboration with Denso Corporation,Japan.

The Company is engaged primarily in the business of manufacturing andsale of thermal products for automotive and home air-conditioning original equipment manufacturers. The Company is a joint venture with 36.79 per cennt ownership by the Suri family of India, 20 per cent ownership by Denso Corporation,Japan & 11.96 per cent ownership by Suzuki Motor Corporation, Japan.

Despite intense competition in the sector, the company has successfully maintained a strong market position, benefitting from its integrated manufacturing operations and strong product development capabilities (aided by a technical collaboration agreement with one of its key shareholders,Denso Corporation).

The company’s revenue mix has remained skewed towards the PV segment; however, over the last few years, it has expanded its product range to cater to CV OEMs, besides other segments such as home ACs (through contract manufacturing operations for other brands) and the Indian Railways.

Although the PV segmentis likely to remain the mainstay of the company's business prospects, its dependence on the segment is expected to reduce over the medium term as supplies for new business segments scale up, according to analysts.