Q4FY26 Auto Ancillaries Sector Report - Demand momentum sustains, but cost pressure emerges

Q4FY26 is expected to sustain strong demand momentum across segments, driven by GST-led affordability and healthy retail traction, with 2Ws, CVs and tractors continuing double-digit growth trends. However, unlike Q3, the quarter sees the emergence of supply-side constraints, including logistics disruptions, gas shortages and rising input costs due to geopolitical tensions. While demand remains robust, PV dispatches and exports are increasingly supply-limited, and margin pressures are building with impending price hikes. Tractor demand remained strong on the back of favourable rural conditions. CV segment growth continued to remain healthy, supported by replacement demand and logistics activity. From our coverage of auto ancillaries, we are positive on FIEM Industries (2W dominant and attractive valuations) and SJS Enterprises (diversified and least affected by Middle East war) but advise accumulate on dips for Pricol (2w dominant) and Happy Forgings (diversified play). Remain
watchful on Sundram Fasteners.

SJS Enterprises:

We expect SJS to post ~26% YoY revenue growth, with moderate sequential uptick driven by continued outperformance over underlying industry volumes supported by higher content-per-vehicle, premiumisation and ramp-up of new programs. We build in 28.7% EBITDA margin, reflecting slight normalization from Q3’s peak but staying close to the company’s structurally higher margin profile, as operating leverage and richer mix continue to offset input cost related inflation.

Fiem Industries:

Fiem is set to deliver a strong ~18% yoy revenue growth, with EBITDA margins at 13.9%. PAT is expected to increase by 23% 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 3-5% 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 19% yoy, (+24% 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 +31% on yoy basis. Margins are expected to moderate to ~12% on increase in aluminium price.

Pricol:

We project consol. revenue to grow by 30% yoy, primarily driven by the consolidation impact of the SACL acquisition. On a standalone basis, we estimate revenue growth of 20% 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 5% qoq revenue growth to Rs2.45bn, mainly due to qoq growth in TVS production. Going forward, we expect premiumization within the 2W cluster segment to continue contributing ~6% incremental growth above the base industry.

Happy Forgings (HFL):

We expect HFL to report ~15% YoY revenue growth, driven by improvement in domestic CV and tractor demand and incremental contribution from ramp-up of new orders. Export demand, however, remains weak, limiting upside. EBITDA margin is expected to sustain at ~30%, easing slightly from the Q3 peak to account for further hikes in RM cost and other input cost; 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 ~7% YoY revenue growth, driven by continued domestic outperformance supported by strong recovery in LCVs and medium CVs, sustained PV momentum, 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 ~15.5%, reflecting some impact from steel price hikes and higher opex particularly for exports.

Click to download the full Auto Ancillaries Sector Report 4QFY26 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 4QFY26

What is driving demand in auto ancillaries in Q4FY26?

Strong retail demand, GST-led affordability, and growth in 2W, CV, and tractor segments are driving demand across auto ancillaries.

Which companies are expected to outperform?

FIEM Industries and SJS Enterprises are expected to outperform due to strong order books, premiumization trends, and resilient margins.

What are the key margin pressures in Q4FY26?

Rising raw material costs, logistics disruptions, and geopolitical tensions are increasing input costs and impacting profitability.

What risks should investors monitor?

Export weakness, supply chain disruptions, and further cost inflation remain key risks for the sector going forward.

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