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Building a powertrain-agnostic growth platform

SPR Auto Technologies (SPR) is evolving from being a traditional piston manufacturer into a diversified, technology-driven, powertrain-agnostic mobility platform through strategic inorganic acquisitions. The piston business is a strong cash-cow franchise for SPR, supported by market leadership, ~500bp higher margins than the next peer and core RoCE of over 50%. SPR is benefiting from rising multi-fuel opportunities (CNG, ethanol, hydrogen and hybrids), strong aftermarket demand, and the premature exit of global competitors from the ICE ecosystem. Leveraging its strong balance sheet and cashflow profile, SPR is reinvesting in acquisitions such as Antolin, Takahata, TGPEL and EMFi, thereby diversifying beyond powertrain-focused products to precision plastic molding components and expanding estimated content per vehicle by 6x to INR30k+. This strategy helps SPR create a scalable auto component platform with balanced exposure across powertrains. We initiate coverage with a BUY rating and a TP of INR6,150, premised on 30x Sep’28E EPS.

Pistons - stronger for longer

SPR operates in a high-entry-barrier precision engineering business with an estimated market share of over 45%, aided by strong technological capabilities and deep OEM relationships. The business is well positioned to accelerate growth, supported by the continued relevance of pistons across multi-fuel powertrains, scale-up opportunities in the aftermarket and non-auto segments, and potential market share gains due to the exit of global players from the ICE segment. Its strong balance sheet, ~500bp higher margins than the next peer, and over 50% core RoCE reinforce its status as a cash-cow business.

De-risking the business through engine-agnostic acquisitions

New acquisitions, including Antolin, Takahata, TGPEL and EMFi, contribute ~35% to consolidated revenue, providing powertrain-agnostic growth exposure. These businesses enable SPR’s entry into high-precision plastic molding segments with strong market positions in India and offer meaningful scale-up and margin expansion opportunities.

Well diversified across multiple dimensions

SPR benefits from a highly diversified business model across products, powertrains, customers, vehicle segments, channels and geographies, reducing concentration and cyclicality risks. Most of its products are powertrain-agnostic and relevant across ICE and EV platforms. No single vehicle segment or customer contributes materially to revenue, reflecting balanced exposure across auto segments and virtually all major OEMs.

Valuation and view

* We estimate a 21% PAT CAGR, driven by a stable standalone business and the rapid scale-up of subsidiaries. The balance sheet is expected to improve gradually from the FY26 base, supported by a strong margin expansion in subsidiaries and limited growth capex requirements. Consolidated core RoCE is expected to improve from 20% in FY26 to 28% in FY29. At CMP of INR4,494, the stock is trading at 23.7x FY28E and 20.4x FY29E EPS. We initiate coverage on SPR with a BUY rating and a TP of INR6,150, premised on 30x Sep’28E EPS. Additionally, the company has recently completed the INR10b QIP to fund future organic and inorganic growth opportunities, which could act as a key trigger for further upside

* Key risks:

1) rise in competitive intensity

2) fluctuations in commodity prices

3) changes in technology

4) loss of key customers.

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