Sundram Fasteners Ltd.: Exports spoil the show - Company Update

We lower target price to Rs 1035 (previously Rs 1085) and maintain Accumulate rating for Sundram Fasteners Ltd. (SFL). We downward revise our multiple to account for extended weakness on exports including delay in EV order to North America, in turn leading to cut in TP. SFL’s performance in 3QFY26 remained mixed, as strong domestic performance (in-line with underlying industry) was partly offset by continued weakness in exports. While there are several factors driving growth over longer term like ramp up of wind energy and high margin EV orders along with addition of new products, the prevailing weak demand in export markets, pushback of EV order, ongoing tariff concerns, and delayed recovery in global CV/PV demand are leading to our cautious view.

Moderate show on consol. revenues:

SFL reported consolidated revenues of Rs15.4bn (+7% yoy; 1% qoq) in 3QFY26, slightly below our estimate of Rs15.5bn, primarily due to muted exports. The domestic revenue growth of 18% was in-line with the underlying industry growth, driven by strong pickup in M&H CV demand. However, export revenues declined by 15% yoy due to weakness in demand (especially for trucks) and US tariffs.

Margins remain stable due to several tailwinds:

SFL reported 15.6% margins; -21bps yoy; -101bps qoq, as higher margins on standalone business was dent by weak margins at overseas subsidiaries. With support from other income, adjusted for one-time expense on change in labour codes, SFL reported a 10% yoy growth in PAT at Rs1.44bn.

Uncertainty on demand and limited short-term triggers:

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 diverting its export volumes from the US to new avenues in Europe. The new capacities are already commissioned for wind energy and EV. However, near-term prospects remain subdued given lack of visibility in export demand (particularly in North America), ongoing tariff-related issues, offsetting the pickup in domestic CV/PV demand, leading to poor earnings forecast for FY26E and improvement in exports only in FY27. The dispatch of the US EV order is expected to scale up more gradual than expected previously, starting in 2HFY27.

Valuation, view and key risks:

With no earnings change for FY26/ FY27E, we expect a 10%/14%/18% CAGR in Rev/ EBITDA/PAT over FY25-28E. We value SFL at 26x Dec’27(previously 30x) PE ratio to arrive at a target price of Rs1035/share (previously Rs1085) and maintain Accumulate rating. We have lowered our multiple to account for extended weakness on exports including delay in EV order to North America. Key risks: Failure to diversify end user industry, weakness in exports.

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

*CMP is as per report published date

Click to download the full Sundram Fasteners Ltd. Q3FY26 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. Q3FY26 Company Update

Overview: Sundram Fasteners is a well-established automotive component manufacturer with strong domestic demand and global export presence. While export markets remain weak in the near term, the company continues to invest in new product segments and emerging industries.

1. Why was Sundram Fasteners’ target price revised lower?

The target price was reduced mainly due to prolonged weakness in export markets and delays in EV orders from North America, which impacted near-term earnings visibility.

2. How strong is the company’s domestic business?

Domestic revenue grew 18% year-on-year in Q3FY26, supported by strong demand in the commercial vehicle segment and steady industry growth in India.

3. What are Sundram Fasteners’ key future growth drivers?

Future growth is expected from expansion into aerospace fasteners, railway components, EV components and wind energy applications.

4. How is the company addressing export market weakness?

Sundram Fasteners is diversifying its export markets by redirecting volumes from the US toward Europe and expanding into new industrial segments.

5. What risks should investors monitor?

Key risks include continued export demand weakness, delays in EV order execution and dependence on the automotive sector.

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