Q3FY26 Auto Ancillaries Sector Report - GST cut ignites strong demand

Q3FY26 is likely to mark the first clean quarter of volume normalisation post the GST 2.0–induced demand deferral in late Q2, with festive spillover in October, normalized billing cycles, and channel inventory restocking driving sequential improvement across most segments. 2W industry continued the momentum on domestic dispatches and strong exports. PVs continues to ride on a strong note - M&M saw its SUV dominant market, Maruti reported strong offtake in the festive season even for the compact car segment. Tractor industry strength persisted another quarter on improved sowing conditions, higher disposable income and GST benefits. CV volumes surprised positively with a mid-teens growth, largely driven by strong retail demand in the lower tonnage truck segment, strong replacement demand, e-commerce expansion, rural logistics, low interest rate and GST benefits.

From our coverage of auto ancillaries, we are positive on FIEM Industries (2W dominant) and Happy Forgings (diversified) but advise accumulate on dips for Pricol (2w dominant) and SJS Enterprises (diversified play). Remain watchful on Sundram Fasteners.

SJS Enterprises:

We expect SJS to post ~24% YoY revenue growth in Q3FY26, with sequential moderation from Q2 driven by seasonally softer exports around year-end shutdowns, while remaining above Q1 levels. Continued momentum on 2W production, strong pickup in 4W production with SJS continuing to outgrow industry volumes supported by higher content-per-vehicle, premiumisation through illuminated and new-generation products, and ongoing customer ramp-ups. We build in 26.9% EBITDA margin, reflecting normalization from Q2’s peak but staying close to the company’s structurally higher margin profile, as operating leverage and richer mix continue to offset export mix normalization.

Fiem Industries:

Fiem is set to deliver a strong 16% yoy revenue growth at Rs6.86bn in Q3FY26, with EBITDA margins at 13.8%. PAT is expected to increase by 32% 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) new models from Yamaha and TVS, is expected to augur well for the company’s performance. We expect an outperformance of ~7-8% on account of shift to LED lighting, now at 63% of lighting revenue from 40% in FY21. This growth trajectory is expected to continue, supported by a robust order book, which is completely LED-focused.

ASK Automotive:

We have estimated the revenue to grow at 7% yoy at Rs9.79bn, (+17% 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 +25% on yoy basis. Margins are expected to moderate to 12% on increase in aluminium price. Effectively, we have built in PAT growth of 1% yoy at Rs663mn.

Pricol:

We project consol. revenue to grow by 52% yoy during 3QFY26, primarily driven by the consolidation impact of the SACL acquisition. On a standalone basis, we estimate revenue growth of 15% yoy, led by premiumization, which will be a key factor contributing to outperformance relative to the underlying industry. Performance in the export and ACFMS segments is expected to remain subdued. For the Pricol Precision Products business, we are factoring in 9% qoq revenue decline to Rs2.19bn, mainly due to qoq decline in TVS production. Going forward, we expect premiumization within the 2W cluster segment to continue contributing ~6% incremental growth above the base industry. Additionally, new customers and model launches could further accelerate this momentum.

Happy Forgings (HFL):

We expect HFL to report ~10% YoY revenue growth in Q3FY26, driven by improvement in domestic CV and tractor demand and incremental contribution from ramp-up of new orders. Export demand, however, remains weak with no meaningful signs of recovery, limiting upside. EBITDA margin is expected at ~29%, normalizing from the Q2 peak as raw material benefits start getting passed on with a lag of ~2 months; however, improving product mix, high machining share (~88%), healthy margins on new order ramp-ups and favourable scrap economics should help sustain margins slightly above long-term averages.

Sundram Fasteners (SFL):

We expect Sundram Fasteners to report ~6.4% YoY revenue growth in Q3FY26, driven by continued domestic outperformance supported by recovery in LCVs and medium CVs, sustained PV momentum post the festive season, higher share of business with existing OEMs, and incremental contribution from wind energy and aftermarket, partly offset by continued weakness in exports, particularly in North America, where truck demand and EV programs remain deferred with recovery expected only from 1QFY27. EBITDA margin is expected at ~16.8%, reflecting sustained benefits from softer carbon and alloy steel prices and stable power costs, while assuming normalisation in other operating expenses and broadly stable product mix sequentially.

Click to download the full Auto Ancillaries Sector Report 3QFY26 Company Update

Analyst:

• Sahil Sanghvi - Research Analyst, Institutional Equities (NISM-201900004744)
• Uvais Khatri - Research Associate, Institutional Equities (NISM-202300049054)

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FAQs on Auto Ancillaries sector report 3QFY26

Auto ancillary stocks are witnessing renewed interest as Q3FY26 signals demand normalization after GST-related deferrals. Below are key investor questions aligned with current search trends.

Why is Q3FY26 important for auto ancillary stocks?

Q3FY26 is the first clean quarter post GST 2.0 demand deferral, supported by festive spillover, inventory restocking, and normalized billing cycles, leading to sequential volume recovery.

Which auto segments are driving demand?

Two-wheelers, passenger vehicles, tractors, and lower-tonnage commercial vehicles are showing strong domestic momentum, aided by premiumisation, rural demand, and GST benefits.

Which auto ancillary stocks look favorable?

FIEM Industries and Happy Forgings remain preferred due to strong domestic exposure and margin resilience, while Pricol and SJS Enterprises offer accumulate-on-dips opportunities driven by premiumisation and higher content-per-vehicle.

What are the key risks to monitor?

Export weakness, particularly in North America, aluminium price volatility, and OEM-specific demand fluctuations remain key risks for the sector.

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