Jefferies sees improving earnings outlook for Indian auto-component makers
Jefferies said aggregate revenue for 20 leading Indian auto-component companies rose 21% year on year in the June quarter, while FY27 earnings upgrades broadened in the September quarter. The outlook is improving despite elevated valuations and commodity-cost risks.
What happened
Indian auto-component sector · Jefferies sees a stronger outlook for Indian auto-component makers as profit growth, resilient margins and FY27 earnings upgrades
Key facts
- 20 leading Indian auto-component companies analysed
- 21% year-on-year aggregate revenue growth in June quarter excluding Motherson
- 29% revenue growth for auto OEMs excluding JLR
- 19% year-on-year aggregate EBIT growth for component companies
- 10% EBIT growth for OEMs
- 15% year-on-year decline in passenger-vehicle EBIT
- OEM margins declined 1.5 percentage points
- Passenger-vehicle margins declined 2.5 percentage points
- 9 companies had FY27 consensus EPS upgrades above 3% in September quarter
- 5 companies faced FY27 EPS downgrades
- In June quarter, 1 company received an upgrade above 3% and 12 saw downgrades
Why this matters
Broadening earnings optimism across Indian auto-component suppliers may strengthen strategic partnership and acquisition opportunities, particularly among companies benefiting from sustained revenue growth.
What to watch
- Monthly Indian passenger-vehicle, commercial-vehicle, two-wheeler and tractor wholesales and production volumes.
- Quarterly OEM commentary on production targets, inventory levels, launches and supplier sourcing.
- Steel, aluminum, copper, rubber and precious-metal price movements, plus evidence of price-pass-through delays.
- Further FY27 consensus EPS revisions, especially whether upgrades spread beyond the current nine companies.
- Order-book growth, export sales, EV-content mix and customer-concentration disclosures in upcoming results.
- Margin guidance, receivable days, inventory build and capex intensity across leading suppliers.
- Prioritize suppliers with FY27 upgrade momentum, multi-year OEM order wins and contractual commodity pass-through mechanisms.
- Screen for exposure to faster-growing segments including EV components, electronics, safety systems, premiumization and exports.
- Avoid treating the sector as uniformly attractive; compare valuation premiums against earnings-upgrade durability and free-cash-flow conversion.
- Monitor whether OEM production schedules and dealership inventory trends validate the June-quarter revenue growth.
- Assess balance-sheet capacity for capex, localization and acquisitions, as stronger demand may accelerate investment needs and working-capital requirements.