Recommendation from Automobile & Ancillaries Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.[EasyDNNnews:PaidContentStart]

SANSERA ENGINEERING LTD : PRECISION ENGINEERING DRIVING GROWTH

HERE IS WHY
✓  Non-Auto and ADS Growth
✓  Healthy Diversified Order Pipeline
✓  Capex Backed by Strong Balance Sheet;

The Indian auto component industry is entering a structurally stronger phase. At the same time, India is also emerging as a larger manufacturing base for Aerospace, Semiconductor, and precision engineering products as global supply chains diversify. Companies with deep machining capabilities, long-standing OEM relationships, and the ability to diversify beyond conventional auto components are therefore well placed to benefit from this opportunity. One such company is Sansera Engineering Ltd, which we are recommending in this issue of Choice Scrip. Sansera Engineering is a precisionengineered components manufacturer with a strong presence across the automotive and non-automotive segments. Over the years, Sansera has built strong capabilities in forged and machined components, connecting rods, rocker arms, crankshafts, transmission and engine parts, while also expanding into technology-agnostic, xEV, and non-auto opportunities.

In Q4FY26, Auto-ICE remained the largest contributor, accounting for around 68 per cent of revenue, while Tech-Agnostic contributed about 8 per cent, xEV about 5 per cent, and Non-Auto around 19 per cent. In Q4FY26, revenue grew 28 per cent YoY to ₹999 crore, while EBITDA rose 52 per cent YoY to ₹193 crore and PAT surged 108 per cent YoY to ₹123 crore. A key reason to like Sansera at this stage is the sharp progress in its diversification journey, particularly in the ADS/non-auto business. Management has been consciously building the non-auto portfolio to reduce Reliance on conventional auto components and tap larger long-term opportunities in aerospace, semiconductor, and other industrial precision applications. This strategy is now beginning to reflect meaningfully in the numbers. The company’s ADS business revenue rose to ₹316 crore in FY26, up 155 per cent YoY, marking one of the fastest-growing parts of the portfolio. In Q4FY26 alone, ADS revenue stood at ₹110 crore, underlining the improving scale-up in this segment. The company has also guided for FY27 ADS revenue of ₹550–600 crore, implying another year of strong growth. As of March 2026, Sansera’s cumulative unexecuted ADS order backlog stood at ₹4,464 crore, executable over roughly five years.

Another important pillar of the Sansera story is its ongoing capex-led capacity expansion, which is being executed without materially stretching the balance sheet. During FY26, the company incurred capex of ₹510 crore, and management has indicated a similar level of capex in FY27 as well. The investment is being directed towards expanding ICE capabilities, augmenting forging and machining capacities, and scaling the ADS business to support future order execution. What makes this capex cycle more comforting is the balance sheet position. Despite the aggressive expansion, Sansera remains financially comfortable, with debt of just ₹591 crore and a debt-to-equity ratio of 0.19.

From a return ratio perspective, Sansera remains a quality business, though not optically cheap. The company reported ROCE of 14.1 per cent. On the valuation front, the stock is currently trading at 58.2x earnings, which is significantly above the industry PE of 27.9x and also above its three-year median PE of 36.4x. The PEG ratio of 1.81 suggests the stock is not inexpensive on near-term growth metrics. However, the premium valuation appears to reflect the market’s confidence in Sansera’s ability to diversify beyond its legacy auto business, scale up its ADS and non-auto portfolio, and sustain superior earnings growth through a richer business mix. Overall, Sansera Engineering appears well positioned at the intersection of multiple growth themes. Hence, we recommend a BUY.

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