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We have analysed various auto ancillary businesses based on valuation multiples, likely earnings growth, return on equity and several business risks.
We believe there are some outliers in the list, on either side, in terms of valuation versus business fundamentals/risk led by fears of electric vehicle-led business disruption or EV-led opportunity driving higher growth.
For long-term investment purpose, we prefer businesses with minimal exposure to commercial vehicle cyclicality, minimal EV penetration led business risk, ability to manage capital structure/efficiency, and ability to innovate.
Going by data analysis, our top picks in the space for long-term investment are CIE Automotive Ltd., Sansera Engineering Ltd., Sona BLW Precision Forgings Ltd., Samvardhana Motherson International Ltd., Craftsman Automation Ltd. and Balkrishna Industries Ltd.
We believe within our coverage universe Asahi India Glass Ltd., Ceat Ltd., Bharat Forge Ltd. and Bosch Ltd. are trading higher than their fair value.
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