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We have analyzed the Q3FY25 performance of 54 listed auto ancillary plays. In Q3, overall EBITDA for ancillaries was flat YoY versus 13.5% YoY growth for OEMs. The underperformance in EBITDA was led by tyres, bearings and forgings. Nifty Auto one-year forward P/E has corrected to ~21x (just below the historical median level) versus Nifty 50’s at ~19x. The 1-year forward PE premium of Nifty Auto to Nifty 50 stands at ~13% inline with historical average and lower than ~20% just six months back.   

Revenue growth at 8% YoY; Lighting and Multiproduct outperform: In Q3, the Lighting segment reported the highest revenue growth at 18.4% YoY, followed by the Multiproduct segment at 9.7% YoY and Tyres at 8.2% YoY. Multiproduct and Lighting led the pack in terms of EBITDA growth at ~12.0% YoY, followed by Suspension and Braking Components at 9.0% YoY. The Tyre segment posted the lowest EBITDA growth, primarily affected by cost pressure in raw material (RM) .      

Top five firms basis YoY revenue growth: Revenue grew 40.4% YoY for Lumax Industries, 39.5% YoY for Craftsman, 24.7% for Gabriel, 23.6% YoY for Lumax Auto Tech, and 23.6% YoY for Swaraj Engines. The top-five firms based on YoY EBITDA growth were India Nippon (up 68.9% YoY), RK Forgings (up 42.6% YoY), PPAP Automotive (up 38% YoY), Igarashi Motors (up 37.3% YoY), and Swaraj Engines (up 35.2% YoY).

Most firms witnessed a QoQ margin drop: Thirty out of 54 firms posted an EBITDA margin drop QoQ, mainly due to negative operating leverage and higher other expense. Among the top-five firms that posted margin expansion were Suprajit Engineering, ZFCV, Jamna Auto, Talbros and Samvardhana Motherson (seasonal). Adjusted PAT contracted for 39 out of 54 companies, led by muted operating performance.    

Uno Minda and Gabriel, our top picks: As per the recent SIAM conclave held in Delhi, the PV industry is set to grow ~1-2% in FY26 (Elara Estimate at ~6% YoY). The 2W industry may grow 8-10% YoY (Elara Estimate at 8% YoY). The CV industry may likely grow at 4-5% (in line with Elara Estimate). Globally, headwinds may persist in Europe (slowing market growth),China (legacy OEMs getting decimated; as highlighted in our recent thematic ‘China energizing seismic shifts’) and the US (tariff related threats over growth). Re-iterate Reduce on SAMIL. We upgrade Uno Minda from Accumulate to Buy in view of recent stock price correction. Re-iterate Buy on Gabriel driven by multiple levers of growth. Barring near-term strain from Tesla production, we are positive on Sona BLW given its ability to outperform industry growth. We downward revise target price for  Amara Raja, Exide, Endurance, MSWIL, Apollo, MRF and CEAT due to cut in target multiple in accordance with downward revision of market multiple while retaining our fundamental views and ratings on the respective stocks as highlighted in our valuation table.

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