Maruti Suzuki And Mahindra EV Trends Will Redefine Markets

Key Takeaways

• Strategic expansion into green mobility and non-automotive sectors is reducing market cyclicality and supporting revenue and margin growth.
  
• Operational efficiencies, capacity enhancements, and regulatory tailwinds are boosting market share, pricing power, and long-term earnings potential.
  
• Heavy dependence on a single domestic auto client, slow diversification, and EV readiness gaps create major risks amid increasing supply chain, competition, and market cycle volatility.

Catalysts

Engages in the manufacture and sale of thermal products for automotive applications in India.

• The acceleration in vehicle electrification and hybrids-evidenced by Subros's ramp up of supply for Maruti Suzuki and Mahindra EV models, and its expectation to grow sales from green mobility segments (currently 20% of revenues)-positions the company to benefit from rising OEM content per vehicle, driving future revenue and margin expansion.
  
• Government-mandated cabin air conditioning in trucks (N2, N3 categories), effective from June, has already resulted in a 34% growth in CV segment sales and is expected to deliver a full-quarter impact going forward, securing Subros's 44-45% market share in trucks and supporting both revenue growth and segment profitability.
  
• Operational leverage gains from high capacity utilization (reaching 90%) and a new greenfield plant at Kharkhoda (adding 0.5-1M scalable capacity by FY'27), alongside continued internal efficiency improvements and localization, are expected to enhance EBITDA margins toward the company's 12% target in the next two years.
  
• Diversification into non-automotive sectors (railways, buses, commercial refrigeration) is gaining traction, with participation in large tenders and steady growth in bus and railway revenues, reducing end-market cyclicality and fostering topline stability and incremental margin upside.
  
• Industry trends of increasing content per vehicle in EVs/hybrids (thermal, compressor components being 1.2–4x that of ICE comparables) and tightening energy efficiency/comfort regulations are expected to favor technologically advanced suppliers like Subros, further strengthening pricing power, order book visibility, and long-term earnings growth.

Subros Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Subros's revenue will grow by 11.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.6% today to 6.3% in 3 years time.
• Analysts expect earnings to reach ₹3.0 billion (and earnings per share of ₹41.12) by about August 2028, up from ₹1.6 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.3x on those 2028 earnings, down from 36.0x today. This future PE is lower than the current PE for the IN Auto Components industry at 30.2x.
• Analysts expect the number of shares outstanding to decline by 0.07% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.23%, as per the Simply Wall St company report.

Subros Future Earnings Per Share Growth

Risks

• Subros's growth remains heavily reliant on the Indian automobile market, with limited progress in customer diversification beyond Maruti Suzuki-leading to significant revenue vulnerability if market share is lost or if key OEMs reduce order volumes.
  
• Rising global supply chain disruptions and geopolitical risks-including potential rare earth material shortages or pricing shifts-could hamper production schedules, increase cost volatility, and compress margins over time.
  
• Despite management optimism, the company faces competitive risks from global component suppliers and OEMs exploring vertical integration, potentially eroding Subros's market share and putting pressure on revenue growth and profitability.
  
• While content per EV vehicle can be higher, Subros has not finalized plans for key EV-specific products like electric compressors and remains behind in localization, putting future revenue and margins at risk if EV adoption accelerates faster than expected and global competitors dominate supply.
  
• The non-automotive segments (railways, home ACs, commercial refrigeration) are still minor contributors, with uncertainties in order flows (railways depend on irregular tenders, home ACs impacted by weather and pricing), limiting their ability to offset auto-cycle slowdowns and affecting both revenue stability and long-term earnings growth.

Valuation

• The analysts have a consensus price target of ₹879.0 for Subros based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹48.0 billion, earnings will come to ₹3.0 billion, and it would be trading on a PE ratio of 28.3x, assuming you use a discount rate of 14.2%.
• Given the current share price of ₹864.05, the analyst price target of ₹879.0 is 1.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.