Auto Ancillaries Sector Analysis - 2W and tractors play to outperform | Q1FY26

The 2w industry started on a relatively softer note versus expectations, impacted by lower domestic dispatches. However, strong export performance reported by the OEMs came in as a big positive as it supported the overall volumes. Jun’25 marked a recovery in sales, with the segment posting a low double digit yoy growth (excluding HMSI volumes). In PVs, M&M continued to outperform its peers with its SUV dominant portfolio, however, Maruti and Tata Motors reported weak dispatches. The tractor industry reported strong high single digit growth which was supported by timely monsoon onset and improved sowing conditions. CV volumes remained weak; however, we expect flat to low single digit growth in FY26E driven by the growth in the bus segment. From our coverage of auto ancillaries, we are positive on SJS Enterprises (diversified play) and Happy Forgings (diversified) but advise accumulate on dips for FIEM Industries (2w dominant), ASK Automotive (2w dominant) and Pricol (partially diversified). Remain watchful on Sundram Fasteners.

Companies under our coverage from Auto Ancillaries sectors:

SJS Enterprises:

We have factored in 10% yoy revenue growth for 1QFY26 at Rs2.07bn, primarily driven by (i) the addition of Hero as a client (dispatches present for part of the quarter) which is expected to drive the standalone performance, and (ii) premiumization trend. Weak dispatches by Tata Motors and Maruti are likely to weigh on subsidiary performance; however, this is expected to be partially offset by its presence in fast-growing Mahindra. Margins are expected to largely remain stable at 25.5%. Effectively, PAT is expected to grow by 10% yoy.  Going forward, we expect the outperformance trend to sustain, supported by the ramp-up in dispatches to Hero, commencement of export orders, and premiumization.

Fiem Industries:

Fiem is set to deliver a strong 14% yoy revenue growth at Rs6.58bn in Q1FY26, with EBITDA margins at 13.4%. PAT is expected to increase by 14.5% yoy. Fiem’s limited exposure to the relatively underperforming Hero, coupled with (i) its strong revenue share from fast-growing OEMs such as TVS and Royal Enfield, and (ii) stable performers like Honda and Suzuki, is expected to augur well for the company’s performance. We expect an outperformance of approx. 5% on account of shift to LED lighting. The shift towards LED technology is progressing strongly for FIEM, with the share of LED lighting increasing from 40% of lighting revenue in FY21 to 64% in 4QFY25. This growth trajectory is expected to continue, supported by a robust order book, which is predominantly LED-focused.  

ASK Automotive:

We have estimated the revenue to grow at 4% yoy at Rs8.96bn, (+13% yoy on excluding wheels assembly business). While we expect the braking business revenues to grow slightly ahead of the industry on account of improved aftermarket performance, the aluminium lightweighting business is expected to clock growth of +20% on yoy basis. On the margins front, we have factored in expansion of 50bps qoq due to ramp down of wheels assembly business. Developments on the alloy wheels testing remains a monitorable for the quarter. Effectively, we have built in PAT growth of 13.5% yoy for 1QFY26 at Rs645mn.

Pricol:

We expect revenue to grow by 44% yoy primarily due to consolidation effect of SACL acquisition. We have projected the standalone business to grow by 10% yoy due to strong performance in the clusters business (incl. premiumization growth), partially offset by weak growth posted by Tata Motors which is a significant PV customer and slow growing CV and off-highway segments. We expect 80-100bps qoq margin expansion in the standalone business. Export and ACFMS segment performance is expected to remain muted. Going forward we expect that premiumization in 2w clusters can continue contributing 6% incremental growth over the underlying industry growth and new customer addition can accelerate this growth.

Happy Forgings (HFL):

We expect an 8.7% yoy growth in revenues for HFL in 1QFY26 driven by pickup in domestic tractor production along with support from new orders like crankshaft for PV, SUV axle seat and steering knuckles to the US and strong traction in Industrial segment. The 25MW captive solar power plant commissioned in Jun’25 should further aid the already strong margins. No pickup in CV production will continue to restrict growth for HFL. However, we remain positive on the new product addition and diversification thesis at HFL and expect strong outperformance once the end user industries turn favourable. The heavy forging capex should provide inroads into new industries with strong margins.

Sundram Fasteners (SFL):

We expect the sluggish performance of SFL to continue for another quarter due to the weak demand in the underlying industries like CV and PV in both the domestic and export geographies. On the export front, SFL has large exposure on Class 8 truck in the US, which has seen lacklustre demand in 1QFY26. Some traction in non-auto segment i.e. tractor and wind energy are expected to keep the revenue afloat. The push back and slow ramp up of the American EV order due to the tariff led uncertainty is another reason for tepid growth in 1QFY26.

Landmark Cars:

We expect the company to witness a strong recovery in topline performance, with Proforma revenue for Q1FY26 estimated at Rs. 16bn, translating into a robust YoY growth of 34% YoY. The improvement is likely to be driven by the ramp-up of new stores opened over the past year, which are expected to start contributing meaningfully. While gross margins may not fully revert to historical levels, we anticipate a sequential recovery trend supported by better operating leverage. Backed by the topline growth and continued focus on cost optimization, we estimate EBITDA and PAT to grow by 38% and 188% YoY, respectively.

Mayur Uniquoters:

We expect the company to report revenue growth of 8% YoY, driven by a recovery in the domestic market and aided by a favourable base. The export segment, which contributes approximately 38% of total sales, typically witnesses stronger momentum in the second half. However, current demand remains subdued due to ongoing uncertainty around tariff-related issues. That said, the BMW South Africa order continues to ramp up steadily, providing medium-term visibility. On the margin front, we anticipate a 22 bps YoY expansion to 22.8%, supported by softer raw material prices. As a result, EBITDA and PAT are projected to grow by 9% and 6% YoY, respectively

Sector Analysis by

• Sahil Sanghvi - Research Analyst, Institutional Equities
• Smit Shah - Research Analyst, Institutional Equities
• Rahul Dani - Research Analyst, Institutional Equities
• Vaidik Bafna - Research Associate, Institutional Equities

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