Auto ancillary stocks in top gear: What’s driving the rally?

In the ever-evolving landscape of the Indian stock market, auto ancillary stocks have emerged as substantial gainers, with Talbros Automotive leading the pack with an impressive surge of 195% in the past year.

Despite the challenges, the global electric car market is experiencing exponential growth, with sales exceeding rupees one crore in 2022. The share of electric cars in total global sales has more than tripled in three years, from around 4% in 2020 to 14% in 2022. Expectations are high for continued strong growth in global EV sales through 2023 and 2024. The Department of Heavy Industries and Public Enterprises invested Rs 20 crore, ensuring a trajectory of sustained growth and robust momentum.

Here are the top performing stocks in the sector:

Talbros Automotive:

Talbros Automotive surged by 195% in the past year, driven by robust financials in FY23. The company achieved a total revenue of Rs 6.5 billion, marking a substantial 12% growth. The gasket division, a market leader, secured orders from domestic and global OEMs. FY23’s profit after tax (PAT) stood at Rs 560 million, reflecting a noteworthy 24% YoY growth. Talbros Automotive capitalized on increased economic activity in the automotive sector, with 25.9 million vehicles produced and a 20% YoY sales increase in FY22-23. The gasket division strategically shifted towards heat shields, crossing Rs 200 million in revenues in FY23. The company aims to boost exports from 25% to 35% in the next 3-4 years, with a focus on electric vehicle capabilities.

JBM Auto:

JBM Auto achieved a remarkable 194% returns in the past year, fueled by significant fund infusion into its subsidiary, JBM Ecolife Mobility Private Limited. Promoter Nishant Arya played a pivotal role in reshaping the subsidiary’s ownership structure. JBM Ecolife specializes in manufacturing 100% electric, zero-emission buses and aims for a threefold growth in bus revenue in FY24, with a tenfold increase in sales volume. JBM Auto plans to deploy 5,000 electric buses across India by FY24-end, investing Rs 5 billion in capacity building and technology enhancement. Strategic participation in tenders positions the company as a key player in the electric bus segment.

Banco Products:

Banco Products stands out as a profitable company, witnessing a surge of 178% in the last year. The company’s earnings per share (EPS) exhibited remarkable growth from ₹19.73 to ₹37.72, reflecting a notable 91% YoY increase. Company’s top-line growth, accompanied by a high earnings before interest and taxation (EBIT) margin, positions it as a strong player in the market. Over the last 12 months, revenues showed an upward trend, and EBIT margins improved from 11% to 13%. The combination of strong earnings growth and a low payout ratio signals promising prospects for the company.

NDR Auto Components:

NDR Auto Components, stock surged 142% in the last one year. Also the company has achieved an impressive annual EPS growth of 59% over the last three years, underscoring its profitability. With increasing revenues and a 3.6-percentage-point improvement in earnings before interest and taxation (EBIT) margins to 5.7%, NDR Auto Components showcases a sustainable growth trajectory. The company’s commitment to balancing top-line growth and margin improvement positions it as an attractive investment option.

Gabriel India Limited:

Gabriel India Limited has provided a positive return of 137% in the last year. Additionally, the company’s board announced a dividend of ₹1.65 per share on September 13th, reflecting an increased payment compared to the previous year. The dividend yield stands at 1.2%, surpassing the industry average. Despite the dividend yield, investors witnessed a commendable 42% increase in Gabriel India’s stock price in the last 3 months. This upward trajectory has influenced a decrease in the dividend yield, showcasing positive market sentiment.

Precisions Camshafts:

Precisions Camshafts shares have delivered a positive return of 129% in the past year. The company adeptly balances dividend payout and growth, paying out less than half of its earnings and cash flow. While its earnings per share (EPS) remained relatively flat, this strategy allows for potential future increases. Despite the possibility of faster earnings growth, Precision Camshafts’ low payout ratio and focus on business reinvestment position it as a promising dividend stock. The company’s commitment to sustained growth and dividend policies makes it worthy of closer investor attention.

Rane Madras:

Rane Madras Limited, experiencing a 118% surge, grapples with a substantial net debt to EBITDA ratio of 5.7, indicating a significant debt load. However, the company showcased an impressive 179% growth in Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) in the last year. Despite the debt challenges, Rane (Madras) strategically focuses on debt reduction, leveraging robust earnings growth. This positions the company as a noteworthy player in the auto ancillary sector, aligning with positive market dynamics.

Sandhar Technologies:

Sandhar Technologies reported a surge of 116%, driven by substantial earnings per share (EPS) growth from ₹11.19 to ₹13.57 in the last 12 months. The company’s focus on sustained earnings growth positions it as a key player in the auto ancillary space.