Sundram Fasteners Ltd - Export recovery surprises positively | Q1FY27 Company Update

Sundram Fasteners’ (SFL) 1QFY27 performance was stronger than expected, led by recovery in exports while domestic performance remained in-line with the underlying industry. 1QFY27 margins were under pressure due to high RM and indirect cost. SFL has already received complete price pass on for the RM cost hike, which should substantially recoup margins. Additionally, improvement in export trajectory, especially in North America Class 8 trucks and heavy-duty segment, along with sustained momentum in non-auto segments (wind, aerospace, railways) provides incremental comfort on growth. EV and ICE orders from North America have finally started and is expected to more than double in three years. With new business additions expected from Europe, SFL also upward revised its capex estimates. This all-round improved visibility has led to upward revision in our target multiple to 30x Jun’28 PE (previously 26x), leading to a TP of Rs 1270. Re-iterate BUY rating for SFL.

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Beat on consol. revenues driven by exports:

SFL reported consolidated revenues of Rs 18.5bn +20% yoy in 1QFY27, ahead of our estimate, primarily due to recovery in exports. Domestic revenue growth remained healthy at 16% yoy, in-line with underlying industry, supported by PV and CV demand. Export revenues grew by a solid 23% yoy, aided by improvement in North American Class 8 truck and PV demand.

RM pressures dents margins:

SFL reported EBITDA margins of 15.5%; -61bps yoy. Compression in margins was driven by pressure on gross margins mainly due to increase in non-ferrous prices (nickel, aluminium), while conversion costs remained stable. Overseas subsidiaries continue to normalize with improvement in China operations, while UK demand remains soft but expected to recover with potential rate cuts. Effectively, PAT grew by 14% yoy at Rs 1.7bn.

Improving export outlook; non-auto continues to scale up:

SFL has plans with respect to introducing new components and adding new customers which should help them deliver growth better than the underlying industry. This includes scaling up high margin fasteners for Aerospace and railways. SFL is closing new avenues for growth in Europe, to compensate for the weakness in EV demand from USA. Non-auto segments continue to provide diversified growth, driven by wind energy (Rs 300mn monthly run-rate, 15-20% growth outlook), aerospace and railways (scaling from Rs 20-30mn to Rs 80-90mn monthly). These segments also carry 100-200bps higher margins than core auto. EV program outlook remains mixed with GM continuing (gradual ramp up by FY28) while Stellantis has scaled back, with ICE programs compensating in the interim. Both GM and Stellantis orders are expected to cater to Rs 2bn in revenues in FY27E and scale up to Rs 7bn in two years. Additionally, improved demand from class 8 trucks and heavy-duty CV in the US, has strengthened the case of sustenance of export revenues. This improved growth visibility has led to upward revision in our target multiple for SFL. We have increased our revenue estimates to account for this revival in growth but have lowered our aggressive margin estimates and increase capex, leading to a mere 0.2%/ -1.1% revision in FY27E/FY28E earnings.

Valuation, view and key risks:

We expect a 14%/17%/18% CAGR in Rev/ EBITDA/PAT over FY26-28E. We value SFL at 30x Jun’28E PE ratio (26x previously) to arrive at a target price of Rs 1,270/share (previously Rs 1,060); an upward revision mainly driven by upgrade in target multiple. Re-iterate BUY for SFL. Key risks: failure to meaningfully diversify end user industry, weakness in overseas demand.

Company website: https://www.sundram.com/

*CMP is as per report published date

Click to download the full Sundram Fasteners Ltd. Q1FY27 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 Sundram Fasteners Ltd. Q1FY27 Company Update

How did Sundram Fasteners perform in Q1FY27?

Consolidated revenue increased 20% YoY to approximately ₹1,850 crore, supported mainly by export recovery. Domestic revenue grew 16%, while exports increased 23% YoY.

What is the target price for Sundram Fasteners?

The research report reiterates a Buy rating with a target price of ₹1,270 per share. This is an analyst estimate and does not guarantee future returns.

What is driving Sundram Fasteners’ export growth?

Improving demand for North American Class 8 trucks and heavy-duty commercial vehicles is supporting exports. New customer additions and business opportunities in Europe could further diversify the export base.

Which non-auto segments are supporting SFL’s growth?

Wind energy, aerospace and railways are emerging as important diversification opportunities. These businesses can also offer higher margins than the core automotive portfolio.

Can Sundram Fasteners’ margins recover?

Margins were affected by higher non-ferrous raw-material costs. The company has received price pass-through for the raw-material increase, which could support margin recovery as cost pressures normalize.

What are the key risks for Sundram Fasteners?

Key risks include weaker overseas demand, slower diversification into non-auto industries, volatility in raw-material costs and uncertainty around EV program ramp-ups.

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