Buy ASK Automotive Ltd for Target Rs 730 by Choice Institutional Equities
ALPS: A Structural Growth Engine Driven by Lightweighting and EVs
Aluminium Lightweighting Precision Solutions (ALPS) is expected to be ASKAUTO’s key growth driver, with revenue share expected to rise from 51% in FY26 to 62% by FY29E, implying a ~26% CAGR (FY26-FY29E), driven by rising aluminium content per vehicle (CPV) and OEM wallet-share gains. Aluminium lightweighting improves fuel efficiency and reduces vehicle weight, while EVs offer 30–50% higher aluminium content than ICE vehicles, creating a structural growth opportunity. ASKAUTO’s powertrain-agnostic portfolio and established OEM relationships position it to capture this shift. Its entry into High-Pressure Die Casting (HPDC) alloy wheels through technical collaborations with LIOHO (Taiwan) and Kyushu Yanagawa (Japan) adds a new growth avenue, with INR 2,500 Mn (4% of total rev) expected in FY28E.
Dominant 2W Braking Franchise Provides a Strong Growth Foundation
ASKAUTO is India’s largest 2W brake-shoe and Advanced Braking Systems (ABS) manufacturer, with ~50% OEM market share. The segment supplies brake shoes (used in drum brakes), brake panels and disc pads (used in disc brakes), which are critical safety components that control vehicle speed and stopping. Braking contributed ~37% of FY26 revenue, and we expect the segment to grow at a ~11% CAGR from FY26-29E. The company is expanding brake shoe and disc-pad capacity from 260 Mn to 320 Mn units, while increasing aftermarket penetration and scaling disc-pad/ABS content. This transition towards higher-value braking products, alongside ~90% utilisation and continued capacity expansion at Bangalore and Karoli, should support sustained growth and strengthen the franchise despite a gradually changing 2W product mix.
Exports, Aftermarket, Cables & New Opportunities Drive Growth; Wheel Assembly Exit Enhances Margin
ASKAUTO is diversifying beyond its core 2W braking franchise through exports, aftermarket, PV components and safety-control cables. Its 450+ dealer network supports aftermarket expansion, which delivered 21% CAGR over FY24–26. New product opportunities through a JV with AISIN and T.D. Holding in sunroof cables provides additional growth opportunities. The management targets 20% export CAGR over FY26–29E, while the exit from the low-margin Wheel Assembly business is expected to support ~80 bps structural EBITDA margin expansion.
Valuation and View:
We like ASKAUTO for its experienced, promoter-led management, industry-leading return ratios (FY26 ROE/ROCE of 25.3%/25.4%), and a financial track record that has consistently outpaced 2W average industry growth. The company posted a consolidated Revenue/EBITDA/PAT CAGR of ~20%/~33%/~37%, respectively, over FY22–FY26, driven by CPV gains and product mix across ALPS and ABS. We initiate ASKAUTO with a ‘BUY’ rating, with a DCF-based target price of INR 730/share, which implies 30x average FY28-29E EPS, implying a 20.3% upside from CMP. We forecast ~18%/~20%/~20% revenue/EBITDA/PAT CAGR, respectively, over FY26–FY29E, led by ALPS scale-up, new alloy-wheel and sunroof-cable verticals.
Optionality: Upside could come from a faster alloy-wheel ramp-up, additional export order wins, earlier-than-guided clarity on the draft ABS mandate, and further collaborations beyond the current technical tie-ups and three JVs.
Risks: Key risks include a draft MoRTH mandate extending ABS to sub-125cc twowheelers, at-risk revenue, 2W Industry headwinds, aluminium price volatility given passthrough timing lags, and customer concentration with the top OEMs.
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SEBI Registration no.: INZ 000160131
