Subros Wins Rs 25 Cr Order Deal From Indian Railways, HDFC Sec Gives Buy Call

As of Friday's closing session, Subros, a small-cap company in the consumer discretionary sector, has a market capitalization of Rs 2,940.18 Cr. Together with Denso, the firm is a top producer of thermal goods in India for use in automotive applications. Compressors, condensers, heat exchangers, and all other connecting components needed to finish an AC loop are produced by Subros, which serves a variety of markets including trucks, buses, passenger vehicles, off-roaders, domestic air conditioners, and railways.

The company said on Saturday that it has won a new contract worth about Rs. 25 crores (approximately) from Indian Railways for the delivery and commissioning of coach roof-mounted air conditioners. The contract was awarded in a recent tender. Coach air conditioners are in accordance with the firm's strategy to develop its business in the railway electric mobility segment. The company currently supplies Indian Railways with rail driver cabin air conditioning systems.

On a consolidated basis, the company reported net sales of Rs 813.37 crore in the September 2023 quarter up 17.02% from Rs. 695.04 crore in the September 2022 quarter. Its net profit climbed 175.03% from Rs. 9.73 crore in Q2FY23 to Rs. 26.76 crore in Q2FY24. Its EBITDA reached Rs. 72.94 crore up 66.68% from Rs. 43.76 crore in the same quarter of the previous fiscal.

The brokerage firm HDFC Securities has initiated a buy call on the shares of Subros for a target price of Rs 469. "We believe investors can buy the stock in the price band of Rs 427-435 and add on dips to Rs 377-385 band (17.5x Sep'25E EPS) for a base case fair value of Rs 469 (21.5x Sep'25E EPS) and bull case fair value is Rs 513 (23.5x Sep'25E EPS) in the next two quarters," said the brokerage.

On Friday, the shares of Subros closed on the BSE at Rs 450.70 apiece. The scrip reached a 52-week-high of Rs 521.40 on (21/06/2023) and a 52-week-low of Rs 272.00 on (27/02/2023).