Top 5 Auto Ancillary Stocks Witnessing Massive Growth

India's automotive industry is revving up for an exciting journey, fuelled by a fast growing economy and government policies designed to supercharge growth.

The country is not just keeping pace; it's leading the pack.

As the largest producer of two and three-wheelers and the third-largest in passenger vehicles, the country's automotive sector is a key driver of economic growth, contributing 35% of the manufacturing GDP.

In Q1FY25 alone, the sector roared ahead with 16% growth across segments, led by a standout 19.6% surge in two-wheeler production. This was driven by strong rural demand and an influx of new models.

With all engines firing, India's automotive components industry is on the brink of an unprecedented growth spurt, ready to seize the opportunities that lie ahead.

In FY24, the Indian passenger vehicle (PV) industry achieved a significant milestone by surpassing 4 million (m) domestic sales for the first time, solidifying India's position as the third-largest PV market globally.

The PV market witnessed an 8.4% year-on-year growth, driven by a strong shift in consumer preference towards SUVs, which now account for over 50% of the market share.

The Indian auto industry overall demonstrated robust performance, with notable recoveries across various segments, including commercial vehicles (CVs) and two-wheelers.

The CV segment showed positive momentum, benefiting from increased economic activities, while the bus market improved due to growth in the tourism sector and public transport systems.

This backdrop sets the stage for a massive growth opportunity in the automotive components sector.

The recent budget, packed with growth-oriented measures, is a game-changer. With Rs 11.11 trillion earmarked for infrastructure and Rs 35 bn for production-linked incentives in the auto sector, the industry is poised for a major leap forward.

Add to this the strategic move to exempt import duties on critical EV materials like lithium and cobalt and the stage is set for an EV revolution, particularly in the booming two-wheeler segment.

These factors present a prime opportunity for automotive component companies.

Here are 5 standout stocks to watch.

#1 ASK Automotive

First on our list is ASK Automotive.

ASK Automotive is a leading Indian manufacturer of advanced braking systems and aluminium lightweight solutions for the automotive industry.

The company, founded in 1988, has a strong market presence and a focus on innovation. It is well-known for its high-quality products and ability to meet the demanding requirements of automotive OEMs.

The company's business has grown relatively well, between 2020-2024, with the sales and net profit reporting a 5-year compounded annual growth rate (CAGR) of 11% and 7.5%, respectively.

The average Return on Capital Employed (RoCE) and Return on Equity (RoE) have also expanded, averaging 21.3% and 19.6% over 5 years.

ASK Automotive Financial Snapshot (2020-24)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	-8.41%	-5.01%	28.97%	26.86%	17.12%
Operating Margin (%)	12.86%	13.27%	8.93%	9.58%	10.23%
Net Profit Margin (%)	6.38%	6.71%	4.05%	4.76%	5.72%
Return on Capital Employed(%)	21.88%	22.88%	16.50%	20.64%	24.37%
Return on Equity (%)	22.69%	18.61%	13.18%	19.28%	23.80%

Source: Equitymaster

In Q1 FY25, ASK Automotive delivered a stellar performance, marked by record-high revenue and profitability setting new benchmarks for any quarter in the company's history.

Notably, ASK Automotive outperformed the industry, particularly in the two-wheeler segment. This success is attributed to economies of scale, increased production at the new Karoli facility and ongoing cost optimisation efforts.

Looking ahead, ASK Automotive has made significant capital expenditures to support its growth plans.

In Q1 FY25, the company invested Rs 800 m in CAPEX, including Rs 350 m towards a new solar plant in Sirsa, Haryana. This solar plant is near completion and will contribute to the company's sustainability goals.

Additionally, the new manufacturing facility in Karoli is ramping up production, benefiting from economies of scale. ASK's upcoming plant in Bengaluru is also progressing as planned, with construction on track for operations to commence in Q4 FY25.

To know more about ASK Automotive, check out its financial factsheet and latest financial results.

#2 NDR Auto Components

Next on our list is NDR Auto Components.

NDR Auto Components specialises in automotive seating. The company, with origins in the 1930s in financial services, diversified into automotive manufacturing in the 1980s.

NDR Auto manufactures seat frames and trims for passenger cars and utility vehicles. The company has built strong partnerships with top global technology leaders and serves major clients like Maruti Suzuki and Suzuki Motorcycles.

Between 2020-24, the business has done phenomenally well. While the sales were up 6 times, the net profit was up an astounding 68 times! This outstanding performance has helped improve returns with the RoE and RoCE at 22% and 16%, respectively, in FY24.

NDR Auto Components Financial Snapshot (2020-24)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	NA	16.39%	97.15%	66.12%	51.63%
Operating Margin (%)	7.68%	12.35%	9.30%	9.69%	9.94%
Net Profit Margin (%)	0.58%	5.58%	6.40%	7.16%	6.44%
Return on Capital Employed(%)	0.03%	5.24%	10.21%	17.91%	22.02%
Return on Equity (%)	0.33%	3.66%	8.06%	13.74%	16.42%

Source: Equitymaster

In Q1FY25, NDR Auto Components Limited reported a total income of Rs 1.72 bn, marking a 33.49% growth. EBITDA increased by 36.76%, with an EBITDA margin of 10.16%.

To meet the growing demand, NDR Auto Components is expanding its capacities. The company has acquired 9 to 10 acres of land in Kharkhoda, near the upcoming Maruti Suzuki plant and is exploring additional land acquisition in Anantapur near KIA's manufacturing facility. These expansions will enhance NDR's ability to support its large OEM clients effectively.

The company's facilities in Haryana, Bangalore and Gujarat are currently operating at 80% to 85% capacity, providing room for growth until the new facility becomes operational.

To know more about NDR Auto Components, check out its financial factsheet and latest financial results.

#3 Shriram Pistons & Rings

Third on our list is Shriram Pistons & Rings.

Shriram Pistons & Rings, part of the esteemed Shriram Group, is a leading Indian manufacturer of pistons, pins, rings and engine valves. The company, with advanced technology and a highly skilled team, offers end-to-end solutions, from design and development to manufacturing.

It operates state-of-the-art facilities in Ghaziabad, Uttar Pradesh and Pathredi, Rajasthan, serving almost all major OEMs and aftermarkets under the brands SPR and USHA.

Shriram Pistons is also India's largest exporter of pistons and rings, catering to prestigious global clients. Beyond its core expertise, the company is expanding its business model to include opportunities beyond internal combustion engines.

Between 2020 and 2024, the business experienced steady growth, with sales and net profit achieving a 5-year CAGR of 10.2% and 25.9%, respectively. Over this period, the average Return on Capital Employed (RoCE) and Return on Equity (RoE) also improved, averaging 18.5% and 15.1%.

Shriram Pistons & Rings Financial Snapshot (2020-24)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	-17.79%	-0.64%	29.56%	26.85%	19.53%
Operating Margin (%)	12.56%	14.72%	16.16%	19.07%	22.85%
Net Profit Margin (%)	4.55%	5.56%	7.92%	11.05%	13.78%
Return on Capital Employed(%)	8.55%	10.92%	17.57%	25.82%	29.59%
Return on Equity (%)	7.03%	8.07%	13.72%	21.27%	25.55%

Source: Equitymaster

Despite the cyclically lean quarter for the auto industry, the company managed to maintain its margins and kicked off FY 2025 on a strong note. The company reported robust consolidated financial performance both in terms of revenue and profitability.

In Q1 FY25, the company achieved a 17% year-on-year increase in revenue from operations and a 15% year-on-year growth in profit after tax (PAT), driven by improvements in operational efficiencies and productivity across various business functions.

Looking ahead, Shriram Pistons is expanding its product portfolio into ICE-agnostic and alternative fuel solutions, including hybrid, hydrogen, CNG, Flex and H-CNG, as part of its strategy to ensure long-term growth and de-risk its business model.

This includes diversification into EV mobility solutions and high-precision injection moulded parts through recent acquisitions.

To know more about Shriram Pistons & Rings, check out its financial factsheet and latest financial results.

#4 Subros

Fourth on our list is Subros.

Subros has evolved into India's leading manufacturer of thermal products for automotive applications. The company, with 36.79% ownership by Indian promoters, 20% by Denso Corporation, Japan and 11.96% by Suzuki Motor Corporation, Japan, benefits from a technical collaboration with Denso.

Over the years, Subros has grown into the largest and only fully integrated manufacturing unit in India for auto air conditioning systems.

The company produces compressors, condensers, heat exchangers and all components necessary to complete the AC loop, serving a wide range of segments including passenger vehicles, buses, trucks, refrigeration transport, off-road vehicles, residential air conditioners and railways.

The business performance has been erratic. Between 2020-2024, the sales and net profit have grown at a 5-year CAGR of 7.7 and 5.1%, respectively. The returns have improved since FY22, with the RoE and RoCE at 15.8% and 10.7% over the same period.

Subros Financial Snapshot (2020-24)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	-5.70%	-9.83%	23.84%	25.73%	9.22%
Operating Margin (%)	10.50%	9.09%	7.03%	6.65%	8.72%
Net Profit Margin (%)	4.26%	2.62%	1.44%	1.70%	3.17%
Return on Capital Employed(%)	17.61%	8.13%	6.33%	8.50%	15.79%
Return on Equity (%)	11.85%	6.13%	4.01%	5.67%	10.71%

Source: Equitymaster

Over the year, Subros has effectively grown its market share in the passenger vehicle segment by 3% and maintained a strong presence in the truck and bus segments. Additionally, the company has made significant strides in cost reduction, localisation efforts and operational performance, resulting in a debt-free status.

For Q1 FY25, Subros Limited reported a revenue of Rs 8.3 bn, marking an 11% year-on-year growth. The company's EBITDA for the quarter increased by 43% year-on-year.

Going forward, the company is expanding its product portfolio, focusing on sustainability and energy efficiency, with new developments in alternative fuels and green mobility solutions.

These initiatives are expected to contribute around 20% of total revenue in the future. Subros is also progressing in product development for the tractor and electric vehicle segments, with key projects in collaboration with major OEMs like Mahindra & Mahindra and Maruti Suzuki.

Over the past few years, Subros has made significant investments in greenfield projects, particularly in infrastructure.

Now, the company's ongoing capex is around Rs 1 bn annually. It's primarily directed towards incremental capacity enhancements and de-bottlenecking existing operations.

This approach allows Subros to achieve steady growth in the range of 8% to 10% without the need for massive new infrastructure investments.

However, when it comes to new technology investments, the company is currently in the feasibility stage, evaluating potential market opportunities.

These investments, expected to materialise in the 2026-2027 timeframe, will be more substantial and are aimed at unlocking new business avenues and driving higher growth in the long term.

To know more about Subros, check out its financial factsheet and latest financial results.

#5 Gabriel India

Last on our list is Gabriel India.

Gabriel specializes in designing and manufacturing high-quality ride control products, including shock absorbers and struts. These products are essential for enhancing vehicle comfort, handling and safety.

Gabriel serves a wide range of markets, including light vehicles, commercial vehicles and speciality applications, making it a leading provider in the automotive suspension industry.

In the electric vehicle sector, the company holds an impressive 87% market share in EV two-wheelers despite a slowdown.

The passenger car segment saw an increase to a 24% market share, bolstered by new programs like the Tata Motors Curvv EV. In utility vehicles, the company maintains a strong 35% market share.

Between 2020-2024, the sales and net profits have grown consistently. While the sales have registered a 5-year CAGR of 10.3%, the net profit have grown at 14.3%. The RoCE and RoE have averaged at 19.3% and 14.1%, respectively.

Gabriel India Financial Snapshot (2020-24)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	-9.88%	-8.54%	37.17%	26.76%	12.57%
Operating Margin (%)	7.89%	7.48%	7.38%	7.68%	9.21%
Net Profit Margin (%)	4.53%	3.56%	3.84%	4.40%	5.47%
Return on Capital Employed(%)	16.51%	12.45%	17.87%	22.30%	27.19%
Return on Equity (%)	13.64%	8.94%	12.24%	16.17%	19.71%

Source: Equitymaster

In Q1FY25, the company reported sales of Rs 8.6 bn, maintaining a solid performance. The EBITDA margin was 9%, reflecting a 13% increase year-on-year. The EBITDA margin remained steady at 9%, consistent with the past eight quarters.

The revenue breakdown revealed that Two Wheelers contributed 63%, Passenger Cars 24% and Commercial Vehicles (CV) 11%, while direct Auto OEM sales comprised 87% of the channel mix, with 13% from the replacement market.

Looking forward, the company aims to be among the top five global shock absorber manufacturers by 2025, focusing on exports, domestic leadership, mergers & acquisitions and technological advancements.

To know more about Gabriel India, check out its financial factsheet and latest financial results.

In conclusion

The automotive industry is poised for sustained growth, fuelled by advancements in technology, changing consumer preferences and expanding global markets.

Companies within this sector are well-positioned to succeed by embracing innovation, capitalising on emerging trends and adapting to the evolving demands of the automotive landscape.

For investors, thorough research and due diligence are crucial. By evaluating individual company strategies, risk profiles and financial health, investors can make informed decisions and capitalize on the opportunities arising from the industry's dynamic evolution.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...