Jefferies prefers Sona Comstar, Bharat Forge as auto ancillaries outpace OEMs
Jefferies said Indian auto-component makers delivered 19% year-on-year EBIT growth in the June quarter, versus 10% for OEMs. It named Sona Comstar and Bharat Forge as preferred buys, citing EV content, exports and order-book visibility.
What happened
Sona BLW Precision Forgings (Sona Comstar) · Jefferies said Indian auto-component makers outpaced OEMs on June-quarter EBIT growth and raised earnings
Key facts
- Auto-component companies reported 19% YoY EBIT growth in the April-June quarter
- OEM EBIT grew 10% YoY
- Passenger-vehicle OEM EBIT declined 15% YoY
- 16 of 20 auto-component companies outperformed the Nifty Auto Index
- Nifty Auto Index was down 1% CYTD
- Sansera Engineering and Sona BLW returned 60-130% CYTD
- Craftsman Automation, Motherson Sumi and Belrise returned 25-50% CYTD
- MRF and other laggards declined 10-25% CYTD
- Multiple expansion contributed 60-75% of returns for Sansera and Sona BLW
Why this matters
The widening performance gap versus OEMs makes EV-content, export-capable and order-book-rich component platforms attractive partnership or acquisition targets, especially where scale can justify premium valuations.
What to watch
- Quarterly order-book additions, especially EV driveline, electrification, defense and export contracts
- EV program launch schedules and production ramps at Indian and overseas OEM customers
- Export demand trends in Europe and North America, including tariffs, trade restrictions and currency movement
- EBITDA/EBIT margin progression versus raw-material inflation and pricing pass-through
- Domestic vehicle wholesale-retail gap, dealer inventory levels and OEM production guidance
- Capital-expenditure intensity, working-capital build and leverage as suppliers expand capacity
- Any reduction in Jefferies-style target multiples or earnings estimates following valuation expansion
- Prioritize supplier exposure over OEM exposure where revenue is tied to EV content per vehicle, exports and booked programs rather than domestic unit volumes alone.
- Audit portfolio concentration in high-multiple auto ancillaries; retain leaders with visible order-book conversion but set tighter valuation and execution thresholds.
- Track whether component suppliers are passing through steel, aluminum and currency volatility without margin erosion.
- For retail and consumer-facing auto ecosystems, expect stronger supplier capex and hiring to support localized EV parts availability, while OEM discounting may rise if vehicle inventory builds.
- Differentiate companies benefiting from structural content gains from those merely riding a cyclical production recovery.