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Subros Ltd
Earnings Call Analysis
Q3-2024 Analysis
Subros Ltd
The company has surpassed the 9% EBITDA margin and is now targeting to further improve it. Over the next 6 to 8 quarters, they aim to cross a 10% EBITDA target set by themselves.
The year-to-date (YTD) 9-month revenue consists of a significant contribution of INR 1,750 crores from passenger vehicle AC products. Other segments such as ECM products, bus AC, trucks, and aftermarket also contribute to the revenue. The company has decided to exclude the home AC business from its growth assumption for now.
By FY 2025-26, the company expects to achieve an increased market share, targeting 45% to 48% in the PV segment and 56% to 58% in the truck segment. Additionally, they are developing new products for EVs and strong hybrids, focusing on radiators, special hoses, and pipes, while localizing compressor production.
EV and hybrid buses are anticipated to show aggressive growth due to government preferences and new purchases. Special kits for these buses have been developed, and substantial growth is expected in these segments over the next 1 to 2 years. The Average Selling Price (ASP) for EV bus air conditioning is projected to be approximately 25% to 30% higher than internal combustion engine (ICE) air conditioning systems.
A transition in refrigerants, specifically from R-234a to 1234yf, is expected to start from 2027. The company is prepared for this with suitable products already available and supplied to OEMs. The CapEx is planned between INR 100 crores to INR 140 crores, excluding any strategic investments like greenfield projects or large localizations.
The company projects to perform better than the industry with an estimated growth rate of around 5% to 6%, compared to the industry's 3% to 4%. This will be driven by new business and new models, especially in the EV space.
The product value for EV vehicles is expected to be around 2.1 times higher than ICE vehicles. The company has already experienced growth with Mahindra, reaching around 24% of Mahindra's thermal products, with expectations to grow to 30% upon supplying for EV applications.
Delta business secured so far this financial year accounts for around INR 400 crores, including railways, bus orders, OEM hybrid and EV businesses, as well as expansion projects. The execution of the current order book is expected in FY '25 and '26.
The company has started supplying AC kits for a pickup vehicle, marking a step in improving penetration with customer Mahindra, which is seen as a strategic focus area.
Management acknowledged the challenges ahead and underlined the commitment to sustainable growth. Although recognizing next year as potentially challenging, they emphasize the need to be watchful and approach the industry performance mindfully.
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Ladies and gentlemen, good day, and welcome to Subros Limited 3Q FY '24 Results Conference Call hosted by Bativala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Annamalai Jayaraj from Bativala & Karani Securities India Private Limited. Thank you, and over to you, sir.
Thank you, Nitin. Welcome to Subros Limited Q3 FY '24 Post Results Conference Call. From Subros Limited management, we have with us today Mr. Parmod Kumar Duggal, Chief Executive Officer; Mr. Hemant Kumar Agarwal, Chief Financial Officer and Vice President, Finance; Mr. Sukhbinder Singh Gill, AVP Finance.
I'll now hand over the call to Mr. Parmod Kumar Duggal for the opening remark, to be followed with a question-and-answer session. Over to you, sir.
Thank you, Mr. Jayaraj. Good morning, ladies and gentlemen, and warm welcome to all of you for Subros investor call for quarter 3 FY '24.
Since last 2 quarters, automobile sales is a clear indicator of overall stability in the auto industry. We're observing a sharp recovery month-on-month in the auto market sales, and this positive trend is anticipated to continue. However, there are mixed views for future growth of FY '25 due to various geopolitical scenarios and also being an election year ahead. We are watchful to this situation.
There is a robust economic growth, new launches, record festive numbers and year-end discount offered by the automakers, which has resulted into passenger vehicle sales during the third quarter of the financial year, went up by 8.26% to 10.12 lakh units as compared to 9.35 lakh units in the corresponding period. At Subros, in quarter 3 of FY '24, we have grown by 12% and year-to-date, up 9%, which is very much aligned to industry growth. The company has achieved a sales of above INR 730 crores during this period and also significant improvement in the profitability. The results of quarter 3 FY '24 have been shared with the stock exchanges and also posted on our website.
Let me elaborate the summary of results one by one. First, I'll update about the industry, a relevant part of our business.
In this quarter, passenger vehicle industry has shown growth of 5% on a production basis in comparison with corresponding quarter of the last year, whereas Subros PV segment thermal products growth in quarter 3 is 12% in comparison with the corresponding quarter of the last year. So our performance is better than the industry performance and this is because of the model mix and also a reflection of new model introduction for Subros.
Commercial vehicle bus is also improving because of tourism sector and public transport system improving. AC equipment ratio is also improving in this segment. Industry has shown a growth of 36% on a production basis as compared the corresponding period, whereas Subros has registered a slightly downside here, 8%, in comparison of corresponding quarter, mainly because of model mix and AC equipment ratio relevant to our customers. However, on a value term basis, it's a growth of 12% in this segment.
Further in commercial vehicle segment, in N2, N3 category, the industry has grown by 17% in quarter 3. And in value terms, Subros has grown by 15% in this segment. In AC equipment ratio, in N2, N3 category, it has also improved by around 6%, which is contributing to partial compensation of flight volume base.
In home AC space, still we are muted on our effort on home AC business expansion. This quarter, there's a small sale of around INR 1 crore, and we are still watchful of the commodity price fluctuation and the tightening offered by the OEMs for the next season.
So overall, revenue from operation has been recorded at INR 732 crores in this quarter, which is having a 12% growth over the corresponding quarter.
Now let me explain each segment-wise contribution to the sales during the quarter. In this quarter, car and non-car segment has contributed around 94% and 6%, respectively. Maruti Suzuki, Suzuki Motor Gujarat, has contributed 85% of the total sales during the quarter. Our share of business in passenger vehicle air conditioning market has improved to 44%. And our share of business in truck AC segment has also improved to 56% now. In bus AC, our share of business is 15% during the quarter.
Now about the operational performance. As I mentioned before, there are a lot of challenges in the supply chain due to the global increase in demand, which finally, we have witnessed in the last 2 years. Commodity price fluctuation, logistic price escalation and foreign exchange volatility also is one of the factors for the operational performance, although commodity price fluctuation has started easing now during quarter 3, which is reflected in our metal sales ratio.
Company has realized EBITDA of INR 66.14 crores in quarter 3 of FY '24 as compared to EBITDA of INR 42 crores in the corresponding quarter. So there is an improvement of 57% as compared to the last year same quarter. Last 2 quarters, we are able to consistently realize EBITDA above 9%.
Profitability before tax in quarter 3 FY '24 is INR 33.96 crores, which is 4.65% of the net sales. So profitability margin with the corresponding quarter has improved by 178%. And last 2 quarters, we have been able to consistently realize PBT of above 4.5%.
Profit after-tax in quarter 3 is INR 26.79 crores, which is 3.67% of the net sales. PAT margin with the corresponding quarter has also improved by 227%, and we are improving the overall PAT against Q2 also.
As a summary, revenue of INR 732 crores in quarter 3, growth of 12%; EBITDA of INR 66.14 crores in quarter 3 with a growth 57%; PBT of INR 33.96 crores with a growth of 178%; PAT of INR 26.79 crores with a growth of 227%.
Briefly on the business update. As I mentioned, quarter 3 FY '24 performance has started improving and registered a growth of EBITDA, PBT as well as PAT. We'll continue this persuasion for the future quarters also, and we'll try to sustain this or improve this performance here on.
As we reported, the profitability was with challenge in the last 7 to 8 quarters. Now because of our effort of cost down and also commodity prices easing off, this is being reflected in our financial performance.
Localization focus for the existing assets from a cost -- global cost pressure and economic fluctuation will continue as our key priority, and we are striving for bringing the overall imports less than 10% in near future.
New business development side, as mobility landscape has fundamentally transformed and is going to continue for 8 to 10 years, so our effort in electric mobility, hybrid cars and also on CNG vehicles is improving quarter-by-quarter. Our collaboration with Denso in terms of introduction of new technology is ongoing. And time to time, we'll continue reporting to you about the new technology in production, along with the support of Denso.
There is significant success of securing new business in EV space, in bus space and also the railway space, which we have reported in previous quarters. In Mahindra, new tractor, OJA, M Star for U.S. market and also for Japan market, SOP has tracked, and we are seeing some growth of the ramp-up coming up in this segment.
Our business for truck is strong for N2, N3 categories where AC is made mandatory from June '25. Engagement with customers are on, and we are now almost finalizing the specification for product development. And soon, we'll be announcing the final results of the negotiation for these AC applications. As I mentioned, coach air con, after the kit development, which we're spending for the last few quarters, finally, all approvals have been received and big tender of INR 28 crores we secured in the last quarter, which was reported to the stock exchange also, and now we are preparing for the delivery of this.
So this is all from my side. Now we are ready to take questions and answers.
[Operator Instructions] And the first question is from the line of Abhishek from Dolat Capital.
Congrats on a strong set of margin despite lower revenue. Sir, my first question, on the growth outlook on the passenger vehicle AC segment. There are many [ nasty ] participants who are saying that passenger vehicle growth would be around 0% to 5%. So in this case, what kind of the growth you're looking for your company? As we know that mix is improving for this segment and plus that the new business will come from the other segment as well, so what is your growth outlook for the next 2 years in terms of the revenue?
Thanks, Abhishek, for the questions. So there are very mixed feedback, which are coming right now for last 2 months, about future outlook of PV segment for FY '25 as well as FY '26. My initial remarks already included this element that next year, because of more geopolitical disruption and also being an election year, things may be muted for the first half because I think government budget would be announced post-election differently. So we need to wait and watch. Right now, I'm not able to give a very precise number on that. But yes, the industry growth in PV segment is being soft now, between 3% to 6%. For the next financial year, we need to wait for another 1 month to freeze on that. But yes, for Subros' perspective, as the growth overall in PV segment may be slightly lower or not as expected, but SUV segment growth would be definitely very encouraging. And since we have a substantial business in SUV segment, our growth definitely will be better than the industry. So I'm not quantifying that, but you can take this as a positive thing that we will be doing better than the industry.
And on the margin side, the gross margin has improved on a quarter-on-quarter basis. So have you taken any price hike? Or what is the outcome of basically the expansion of the margin? And what is your outlook for the EBITDA and gross margin for the next 1 and 2 years?
So there's a mix of efforts which has reflected into improvements in margins: one, partially, we could settle our claims with the customer about escalation, which are not part of our regular indexation, that is one; two, a very aggressive action which we have taken for cost-down projects, which has resulted into a realization of better MSR and also resulted into better EBITDA margin, so these have already factored in. And as you saw, in the last 2 quarters, we have crossed that, a reference of 9% EBITDA, and we will try to improve hereon. Again, as I mentioned in my previous conversation and also in our investor meet also, we are not targeting a very long but we are targeting a short milestone of each quarter. Next 6 to 8 quarters, we want to achieve and cross the 10% EBITDA target, which we set for ourselves. And right now, efforts are, first, to achieve that milestone.
Okay, sir. And sir, segment-wise, how much 9 months' number for the radiator, passenger vehicle AC and other segments?
So YTD 9 months overall, around INR 1,750 crores of the revenue has come from passenger vehicle AC products. INR 350 crores, around, is ECM product, that is radiator. Bus AC has contributed around INR 30 crores. Trucks has contributed around INR 70 crores. Aftermarket is maybe around INR 55 crores or so. And rest is from other segments.
Okay. And my last question, on the home AC segment, so in the last couple of quarters, you are avoiding to increase your production because of that margin pressure. So what is your plan going ahead? Do you want to just create this business the full year? Or do you want to increase your business with some modifications?
So what I said is we have just muted our effort on aggressive persuasion of this business from a growth perspective because finally, there is a pressure on margin. So till the time we get relevant prices, which will support the overall margin for Subros, we'll be going slow. And we need to wait and watch for this time summer how it is going to shape up. Based on that industry, we'll take a positive -- we may take a positive trend. So accordingly, we'll make our plans to expedite these things. Right now, we are just watchful.
Sir, what kind of assumption we can take?
There is no financial impact negative to us while we are on mute. So that's why it does not impact our operational performance.
Sir, what kind of the assumption we can take then on the home AC business revenue? Although we know that this is positive on a margin perspective, but going ahead, if I talk about the growth, growth will come in only from the home AC segment, incremental growth. So what is your plan for that? So what kind of assumption we can take for the next 2 years on home AC segment?
So home AC segment, when we are saying that Subros growth would be better than the industry, we are excluding home AC business as of now for the assumption of growth. Whenever there would be a revival of plan for home AC, that would be add-on to our natural growth, which is being planned now. This year, we don't expect that we'll go beyond. We have done around INR 4 crores, INR 5 crores so far. So it might be around INR 6 crores during this year. Next year would be, as of now, with the current assumption between INR 10 crores to INR 15 crores till the time we see a big change in the industry model. So we'll be muting it till that time in this.
The next question is from the line of Aashin Modi from Equirus.
Sir, coming back to the margins. So obviously, margins have now improved to 27% levels, and assuming that the raw material baskets remain business, can we go back to the earlier levels of 29%, 30%? And secondly, what is the impact of this Red Sea crisis on gross margin?
So two questions you asked. First of all, on the gross margin, which has already reached to around 25%, we would be grateful in improving. We will not be jumping to directly 30%. But yes, it would not be 30% exactly, but from 25% to 26% to 27%. This is how the gradual improvement would be in subsequent quarter. There is no substantial impact because of this Red Sea crisis because our import from Europe side is not substantial. It is very negligible imports. So our major imports are from China or Korea or from Japan, so we are not substantially impacted because of this crisis. But of course, as a value chain, there may be impacts on the OEM side, there may be impacts on some other suppliers, which may disturb the overall value chain. We are watchful of that situation.
The next question is from the line of Varun Arora from B&K Securities.
Am I audible?
Yes, please.
Sir, your target for auto, non-auto is 75-25. Currently, it is now 94-6, as per your comment. By what time line we can achieve this target, sir? Any internal target you have set for this, sir?
So there are 2 elements which will substantially improve this car, non-car percentage. One, the adoption of air con by N2, N3 category where the sizable market will improve or increase, where we are targeting a substantial market share also. And second, growth in rail segment, where we started getting -- ordering coach air con now. So these two would be the key factors for moving to non-car segment growth.
Got it. Okay. Anything new on the orders? Right now, you are targeting or expecting from the railway, sir, as you had just over INR 25 crore order book from the railway? Any other thing that's been going on, on that, sir?
Varun, since railway is always on a tender business, so tender frequency is not fixed. So after INR 28 crores, we got another INR 4 crore of small tender. Another 3, 4 tenders are in pipeline which would be decided maybe in next quarter or so. So we are participating via tenders. So that's how -- on a periodic basis, we'll continue updating you.
Okay, sir. And on market share in PV, so [indiscernible]. Sir, I just want to ask, have you upgraded your target to 60% market share? As per the last earnings, you were targeting of 35%. So right now, it's 54%. So have you upgraded your target from 50%, 60%?
No. Right now, we are consistent in our long-term approach. So what we said in our investor meet that from 44%, which is currently our share of business in PV segment, we want to inch it around 25 to -- 45% to 48%. In Truck segment, it was targeted 56%. But right now, 54% is just event -- the outcome of the model mix. But when this N2, N3 category would be fully implemented, 56% target, which may go up to 58%, that's how we need to -- we'll be striving for share of business improvement.
Okay. And at -- by what time line you are expecting this 58% market share, sir?
So this notification would be now, I think, rolled out from June '25. So maybe '25, '26 -- FY '25, '26, this would be more realizable.
[Operator Instructions] The next question is from the line of Aashin Modi from Equirus.
Okay. Sir, my second question was regarding product development for strong hybrids and EVs. So we were developing compressors for strong hybrid and also the whole product kit for EV cars. Where are we on that journey? And by when do we expect the product to be developed and get tested?
So on the EV side and strong hybrid side, there are a few products which are part of this introduction. So one is the radiator, which is a special kind of radiator, that has already been launched now. Second is on the [ ETXVs ] and special hose and pipe for EV. That has also been launched now with Mahindra business, what we got for all the EV platform and also for Maruti's EV car, they will be introduced now.
The only remaining issue what we have is on the compressor side. So this compressor would be more for localization because product is already available in Japan. So that visibility is ongoing right now for localization of this compressor because finally, it would be very important step, very large investment as well as introduction of EV in Indian market based on the final specifications. So that engagement with the customer to decide the final specification also, the location as well as for investment -- to the extent of investment, this is being under study. So it may take another 2 to 3 quarters to [ freeze ] on that, and we will update the investors accordingly.
The next question is regarding the electric -- the bus category. So now with EV penetration increasing in that category, how do we see that market expanding? And also, how do we see Subros revenue expanding in the bus category going forward?
So EV buses definitely would be very aggressive growth because the government has decided to buy most of the new purchases through EV buses only. EV buses require a very special kind of kit, which is already developed and given to the OEM for final integration with their system. All the OEMs -- kit is at very advanced stage for final integration.
And also in addition to EV, for hydrogen buses also, a special kit is required, which is also developed and given to -- of course, now it is in public that Ashok Leyland is developing a bus kit with the hydrogen cells. So for hydrogen bus kit also, we have supplied to them. One order we already received. Second order is in pipeline. So the projects are on, but we see a very sharp growth here in bus segment, both in EV as well as in hydrogen cells. So maybe in next 1 to 2 years, we see a drastic improvement.
And sir, what would be the ASP of EV bus versus a normal bus? And what would be the industry size right now? And how it will improve going ahead with [ AC ] penetration into the EV...
II'll not say it would be incremental industry. It is a replacement industry because whatever right now is the ICE bus will convert to EV bus. But from ASP standpoint, it would be around 25% to 30% delta from ICE air con to EV air con.
And regarding penetration, AC penetration in the bus category?
That is right now between 7% to 9%, may increase to around 15% to 20% maybe a span of 3 to 5 years.
Okay. And finally what would be the size of this bus industry, AC bus industry currently?
AC bus industry would be around, maybe around INR 175 crores to INR 200 crores.
And market share?
Right now, our market share is 15%.
[Operator Instructions] The next question is from the line of Arun (sic) [ Arjun ] Khanna from Kotak Mahindra.
Congratulations on a good set of numbers. Sir, the first question is on the railways. While you did clarify in terms of the order tenders, et cetera, but in terms of the overall market size, what we address, how much would be the tendering that actually comes through? And how do you see this grow in the next 2 to 3 years? So when you plan in terms of CapEx, what kind of revenues do you envisage, say, for the '26, '27?
So thanks, Arun, for the question. Railway business is not a very regular business. It all depends upon government spending on converting the existing rail engine to air con or coaches to the air con. And also it depends upon how much is the allocation for the new bogies. So it would be, I'll say, periodical or maybe a tender-based business only. But yes, over a period of last 3 to 5 years, government initiative of first converting all drivers' cabin to air con is definitely a very much encouraged action.
And second, more and more AC coaches are being launched now. So right now, we are starting with Indian Railway, then our next action would be to all Vande Bharat and this Amrit Bharat that the new series, which will be coming now. As a long-term segment, we are expecting that we should be touching between INR 75 crores to INR 100 crores, which would be around 30% or 35% of the total market. So that's our plan between 3 to 5 years, and our actions are aligned to that.
From an investment perspective, there is no very large investment required for this because this is more or less, there are a few in-house parts, there are few outsourced parts, which are specified as part of the railway specification, and then finally, the assembly part of that. So that's how this whole business model is.
Sure. Very helpful, sir. Sir, the second question is we talked about hydrogen vehicles. Those were more in terms of fuel cell. But if it's hydrogen ICE, is there any change in the technology used for the air conditioning of the vehicle?
No. Luckily, this is common for us, whether hydrogen ICE or hydrogen fuel cell, the AC air con will not have a substantial change, or there will be a negligible change.
No sir, I was actually asking between, say, hydrogen ICE versus your current ICE vehicle. So compared to current diesel, is there any change in content of vehicle for us?
That is for sure because hydrogen ICE and normalized AC kit has some differential because the battery cooling module or the integration part is substantially different. So you can take a delta of maybe around 30% between our normalized air con versus hydrogen ICE air con.
Sure. But there would not be a battery in a hydrogen ICE, right?
But we are keeping provision common for ICE, hydrogen ICE as well as battery. So we are -- it would be part of scope or would not be part of scope, but there would be other changes which will have that delta of 30%.
Perfect. Sure. Sir, if one looks at for the newer technologies in air conditioning globally, developed countries have moved to HFOs, do we have the technology for the same given that India is now producing vehicles which are exported?
So in the refrigerant part, the transition is from 2 34a -- R-234a to 1234yf. So there would be transitioning already. This refringent is being used for all exported vehicles for last -- more than 3 years now, rather 4 years. And in India, this would be gradually implemented from 2027 as per the Paris agreement. So products suitable for this transition have already been rolled out, they're available, and they are already part of supply to the OEM.
So we have indigenized this technology at Subros?
Yes.
Perfect. Sir, just one more query. In terms of our CapEx. If you could just help us understand how do we look at it over the next 2 years? I know you mentioned that possibly we could have that EV CapEx. So with it and without it, what would be your outlook for FY '25 and '26, sir?
So we are very consistent in terms of our investment strategy, and I'm repeatedly informing this. Our CapEx normally between INR 100 crores to INR 140 crores would be there, which will include the maintenance part, which will include the new product development, automation or any other cost on projects, so and so. But any strategic investment, whether for greenfield or for a very large localization, including the EV part would be a very special investment, which would be taken care of as and when we decide to go for that. Whether we'll go in one shot, whether we'll go in phases, that would be addition and we'll inform suitably.
Sure. Wishing you all the best.
Thank you so much.
[Operator Instructions] The next question is from the line of Varun Arora from B&K Securities.
Sir, if you can provide any order book number and as well as the breakup between the [indiscernible].
So Varun, in our industry, order book is not a very specific KPI because wherever we are already packaged in any model. So these models will continue till the life of the vehicle. So it may have 5 to 7 years. So we'll be following the national growth of such model for future growth. But additionally, there would be certain modern changes, full moderate change or a minor change, or there would be a new model introduction by the OEM. Based on that, the incremental revenue in next 2 to 3 years, where we already secured some delta business is around INR 400 crores so far in this financial year, which include railway, which includes a new few bus orders also and which include OEM businesses for hybrid or for EV as well as the expansion projects of [ few OEMs ].
Okay. And just for FY '25?
So order book this year, that is FY '24. The execution would be maybe '25 and '26. The SOP timing will be different.
Okay. Okay. So 50%-50%, we can say. So like 50% will be executed in FY '25 or FY '26, like that?
Maximum. I think of the current order book, the SOP would be max in SOP in '26.
Okay. Maxim is in '26?
Yes.
The next question is from the line of Aditya from HDFC Securities.
Yes, sir, just one point. Most OEMs for this year are guiding for low single-digit growth because the pent-up demand is now behind. So in this backdrop, how are we seeing our growth? It will come from new models or premiumization?
So interestingly, Aditya, as you said rightly, everybody is talking about single-digit growth, but we are not quantifying whether single digit would be a very early tenors or the late tenors. But yes, next year is going to be like this. We will be having slightly better performance than industry, which I said before also, only because of some incremental business or the new model where we have secured business, especially in EV space, because that would be a new model launch, not the existing growth of existing models. So maybe between 5% to 6%, that's how we look at -- if market is between 3% to 4%, we'll be maybe around 5% to 6%.
[Operator Instructions] The next question is from the line of Arjun Khanna from Kotak Mahindra.
Just in terms of the content, while you mentioned maybe 200 bps higher growth than industry. We were looking at new EV-related products coming through. Just to remind me, sir, in terms of content per vehicle, how much higher is it, say, for an EV versus a normal vehicle given that we have one order you mentioned from Maruti and from Mahindra and Mahindra? So compared to the equivalent normal vehicle, what would be the content increase?
So it is not by vehicle. It is by the applicable products. For example, in Mahindra, if we have taken hose and pipe, and if we compare hose and pipe of ICE engine versus EV engine, it is just 2x. If we take an example of Maruti, other than compressor, if we take HVAC, condensers or ECM together, it would be around 1.25x or so.
Sure. And including compressor, just understanding kit value because localization would happen over a period of time, but...
Yes. So compressor would be around 5x. If we compare ice compressor versus between 4x to 5x in case of any compressor versus ICE compressor.
Sure. And on an overall kit value basis, suppose you're supplying all because I don't know the price of individual components. So on a like-to-like if INR 100 is for an equivalent ICE, so what would it be for an EV, sir, if assuming the entire kit?
It would be around -- if it is INR 100, so INR 190 to INR 210 based on the model application.
Including all compressor, hose, pipe and other shops. Perfect. So around 2.1x is the number.
Yes.
The next question is from the line of Aashin Modi from Equirus.
Sir, regarding our share of business with M&M. So we have earlier indicated that we are looking to increase our share of business to 25%, 30%. So where are we on that in terms of conversation with Mahindra? And also, which are the major service parts of kits we supply to Mahindra? And do we expect to add products over there?
So Mahindra was our focused attention as a customer growth. So we started -- maybe 4, 5 years, we were around 10% to 12% of the total Mahindra thermal [indiscernible] with us. We already reached to around 24% now. The next target would be around 30% when we start supplying for EV application, Mahindra started launching EV. There are 3, 4 models which are still in the pipeline. So as when we increase -- or these launches will happen, our share of business will increase. And also, we started supplying -- supply for Mahindra pickup vehicle, where ACs are also introduced now. So that SOP also started this month. Of course, this will come in the next quarter as a reflection. So our penetration in Mahindra as the customer is improving quarter-by-quarter.
Sir, which model are we talking about where we started supplying AC kit?
That is a pickup vehicle.
The next question is from the line of Nemish Shah from Emkay Investment.
So sir, you mentioned about [ realization ] differential between ICE and EVs, which is about 2x. So what will be that for a hybrid vehicle?
So hybrid vehicle also use electric compressor, and the only change point would be the AC pipe. So it would be between 1.7 to 1.9x. So that is how the hybrid versus complete 100% EV would be having [ differential ].
[Operator Instructions] If there are no further questions from the participants, I now hand the conference over to the management for closing comments.
So thank you to all of you, first, to have to [ substantial ] growth, being patient when we were down in terms of top line and bottom line and since now the recovery progress is happening now and we see a sustainable growth from here on. As everybody has touched upon to this subject, next year is going to be very challenging. We are not sure about the exact number, how the growth will shape up. But surely, between H1 and H2, there would be a drastic differential. So we need to be watchful of the industry performance, and we'll keep you updating about the progress and what assumption we have taken for the next year's plan in subsequent period inflection. Thank you so much for all of you.
Thank you. On behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.