Subros ends FY2026 with record Q4 revenue, but commodities keep margins on a tight leash

Subros closed Q4 FY2026 with its highest ever quarterly revenue, helped by a recovery in the auto cycle and a sharp step-up in commercial vehicle demand. Revenue from operations in Q4 came in at INR 1,049.76 crore, up 15.55% year on year. EBITDA was INR 100.07 crore, up 0.84%, while profit after tax rose 7.56% to INR 49.69 crore.

For the full year, revenue from operations grew 11.52% to INR 3,755.52 crore. EBITDA increased 5.77% to INR 362.93 crore and PAT grew 10.23% to INR 165.78 crore. The growth rate gap between revenue and EBITDA explains the key theme of the quarter: strong volume and new SOP wins, but persistent cost pressure from commodities and currency.

The year’s headline: growth outpaced the industry, but margin math got tougher

Management described FY2026 as a year where demand recovered sharply from Q3 and remained healthy through Q4. In the concall, the CEO highlighted industry growth of 10.4% for the full year, with passenger vehicles growing 7.9%. Against that backdrop, Subros delivered double-digit revenue growth.

The company also reiterated its market standing. Management stated market share of 41% in the passenger vehicle AC segment and 41% in the truck AC and blower segment. For bus AC, it cited a share of 16% during the quarter.

However, profitability continued to reflect a familiar challenge in automotive components: raw material and currency volatility. The company’s FY2026 EBITDA margin was 9.70% versus 10.22% in FY2025. In Q4, EBITDA margin stood at 9.57% versus 10.96% last year.

What drove Q4: commercial vehicles, new awards, and railways momentum

Subros attributed its record Q4 revenue to market demand and SOP of new business awards. A notable driver was the commercial vehicle segment. In the concall, management said sales in truck AC recorded growth of 168% in Q4 and 111% for the full year, aided by the mandatory AC norm for N2 and N3 categories.

Another growth vector was the railway business. Management said the rail segment is emerging as a significant vertical and disclosed that it concluded a new railway tender of INR 52 crore in FY2026, which is expected to be executed in subsequent quarters.

The company also pointed to its positioning in new mobility. Management stated that business from hybrid, electric and CNG vehicle thermal systems contributed 25% of total revenue. This matters because thermal management content per vehicle typically rises as vehicles become more electrified and software-controlled.

The margin story: pass-through exists, but the timing hurts

A large part of the Q4 discussion centered on commodity and forex. Management said aluminium, copper, steel and polypropylene were elevated, and explained that current compensation mechanisms typically operate on a quarter-lag basis. When prices rise sharply within a quarter, the company absorbs the cost initially and receives compensation later.

In response to an investor query, management said it may negotiate monthly indexation instead of quarterly to reduce the impact. It also acknowledged that while pass-through can match costs, EBITDA margin as a percentage can still come under stress because pass-through revenue increases the denominator without contributing markup.

On labor, management said wage settlements and minimum wage revisions will increase costs across geographies, but it is in discussions with customers for compensation and noted that indexation exists for wage settlements as well.

Capacity and capex: Kharkhoda and e-compressor are the next leg

Subros is adding capacity to stay aligned with OEM growth plans and to prepare for electrified powertrains. Two projects were highlighted.

First is the Kharkhoda greenfield project. Management said construction is progressing and SOP is scheduled by end of Q2, with supplies to begin aligned to customer program launches. In Q and A, management quantified that the project adds roughly 0.5 million capacity of HVAC and hoses and tubes. It also stated that, within about two years after SOP, utilization can reach 90% to 95%, implying an incremental revenue delta of around INR 200 to 250 crore once fully utilized.

Second is the Karsanpura expansion focused on e-compressor manufacturing. Management stated capex of about INR 175 crore for the e-compressor project and about INR 150 crore for Kharkhoda. It also said the expansion includes additional ICE compressor capacity because Noida is fully utilized.

On timelines, management said equipment could be ready by January 2027 to March 2027, followed by validation and trials, with commercialisation most likely in Q3 FY2027-28, aligned to OEM SOP targets.

Management also outlined a phased localisation approach for e-compressors, beginning with imports and assembly in India, and targeting about 70% localisation over time.

Working capital and cash flow: inventory and receivables moved up

Cash flow was another topic investors pushed on. The CFO attributed the decline in operating cash flow to two main factors: a rise in receivables and higher inventory.

Receivables increased after the company moved away from an earlier discount facility with customers that enabled early payments. The CFO said trade receivables rose by about INR 124 crore as the company shifted back to normal credit terms.

Inventory also increased because import lead times stretched due to global disruption. Management said the import cycle, earlier around 25 to 28 days, has moved to around 45 to 60 days, and Subros built inventory to protect customer supplies.

What to watch from here

Management was cautious on near-term margin visibility. It said FY2026-27 could be a pressed year due to geopolitical uncertainty and commodity price volatility, but the company aims to maintain its current absolute EBITDA levels with moderate improvement or rationalization.

The next year is likely to be shaped by three moving parts: how quickly indexation mechanisms catch up to commodity swings, how the truck AC demand normalizes after the regulatory-driven ramp-up, and how effectively new capacity comes onstream without adding execution risk.

Subros ended FY2026 with strong top-line momentum and a clear investment roadmap in Kharkhoda and e-compressors. The company’s narrative is not about chasing a sudden margin jump. It is about protecting profitability through localisation and efficiency, while building capacity for the next wave of vehicle platforms.