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Dolat Capital Report
Subros Ltd. reported weak performance in Q1 FY21, impacted by slowdown in passenger vehicle segment and the nationwide lockdown. Revenue de-grew 87% YoY to Rs 738 million (versus estimate Rs 1.4 billion).
Ebitda turned negative to Rs 299 million (versus estimate Rs 115 million) 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-19 levels. However, system inventory which was piled up due to lockdown will be liquidated in Q2.
At present, Subros has Rs 2.4 billion worth of inventory (versus normal inventory of Rs 1.9 billion).
We expect the company to be a key beneficiary of recovery in the PV segment and market share gain by Maruti Suzuki India Ltd. owing to increasing preference for low-end entry-level cars. Maruti Suzuki accounts for approximately 70% of revenue for Subros.
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