Sundram Fasteners Ltd. - Export recovery surprises positively; domestic steady - Company Update

Sundram Fasteners’ (SFL) 4QFY26 performance was stronger than expected, led by recovery in exports while domestic performance remained in-line with the underlying industry. Q4FY26 margins were lower than expected due to RM cost pressure. FY26 was a year of tepid growth due to weak underlying demand and geopolitical disruptions. However, 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 order ramp-up remains gradual and uncertainties persist on tariff and RM cost inflation, limiting any sharp pickup in margins. We revise our earnings by +2/-4% for FY27/28E resp. to account for a gradual margin expansion. We upward revise TP to Rs 1,060 (previously Rs 1,035) largely due to valuation roll forward and upgrade SFL to BUY rating, driven by an attractive valuation (21x FY28 PE), post the steep share price correction.

Beat on consol. revenues driven by exports:

SFL reported consolidated revenues of Rs 16.9bn (+11% yoy; +10% qoq) in 4QFY26, ahead of our estimate of Rs 16.4bn, primarily due to recovery in exports. Domestic revenue growth remained healthy at 14% yoy, in-line with underlying industry, supported by PV and CV demand. Export revenues grew 6% yoy, aided by improvement in North American Class 8 truck demand, where order inflow has seen a sharp uptick (2x yoy in Q4), although retail demand remains weak. For FY26, revenues grew 6% yoy to Rs 63bn.

Margins impacted qoq due to RM pressures, but yoy stable:

SFL reported EBITDA margins of 15.1%; +40bps yoy; -50bps qoq. Sequential moderation was driven by pressure on gross margins mainly due to increase in non-ferrous prices (nickel, aluminum), 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 30% yoy at Rs 1.6bn, supported by other income and operating leverage. For FY26, SFL clocked 15.8% margins, a decline of 10bps and a PAT of Rs 6bn; +10% yoy.

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 to 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. Additionally, improved demand from class 8 trucks and heavy-duty CV in the US, has strengthened the case of revival in export revenues. With the domestic business expected to outperform underlying industry, we turn positive on prospects of SFL.

Valuation, view and key risks:

We expect a 12%/17%/19% CAGR in Rev/ EBITDA/PAT over FY26-28E. We value SFL at 26x FY28E PE ratio (unchanged) to arrive at a target price of Rs 1,060/share (previously Rs 1,035); an upward revision mainly driven by valuation roll forward. We upgrade to BUY (previously Accumulate) due to attractive valuation (21x FY28 PE), post a steep correction in share price. Key risks: failure to diversify end user industry, weakness in EV demand.

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

*CMP is as per report published date

Click to download the full Sundram Fasteners Ltd. Q4FY26 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. Q4FY26 Company Update

What drove Sundram Fasteners’ Q4FY26 performance?

Recovery in export demand, especially in North American truck segments, along with steady domestic growth supported performance.

Why are margins under pressure?

Rising raw material costs, particularly non-ferrous metals, have impacted margins despite stable operational efficiency.

What are the key growth drivers ahead?

Export recovery, expansion into aerospace and wind segments, and new customer additions are expected to drive growth.

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