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]

Belrise Industries Ltd : AUTO ANCILLARY PLAYER EXPANDING GROWTH AVENUES

HERE IS WHY
✓  Diversifying Beyond Two-Wheelers
✓  Higher Content Per Vehicle
✓  Defence & Aerospace Expansion

I ndia's automobile industry continues to benefit from rising vehicle ownership, premiumisation, localisation and increasing exports, creating long-term opportunities for auto component manufacturers. Companies with diversified product portfolios and higher value addition per vehicle are well placed to outperform industry growth. Considering these structural tailwinds, we recommend Belrise Industries Ltd. as our Choice Scrip. Belrise is a leading automotive component manufacturer supplying safety-critical products across two-wheelers, passenger vehicles, commercial vehicles, EVs, defence and aerospace.

During Q4 FY26, revenue grew 12.27 per cent YoY to ₹2,553 crore, while net profit increased nearly 18 per cent YoY to ₹130 crore. Management continues to guide for mid-teen revenue growth with stable EBITDA margins in FY27, supported by robust execution and expanding customer relationships. One of the biggest positives is the company's successful diversification strategy. A few years ago, Belrise was largely dependent on a single customer and the two-wheeler segment. Today, management highlighted that no single customer or vehicle category dominates its business, significantly reducing concentration risk. Another key growth driver is the sharp increase in content per vehicle. Rather than relying solely on industry volume growth, Belrise continues to increase the number of components supplied to existing customers. During FY26, management highlighted that content per vehicle increased by around 65–70 per cent in the two-wheeler segment and by nearly 40–45 per cent in passenger and commercial vehicles following the H-One integration. Higher content per vehicle enables revenue to grow much faster than vehicle production volumes while strengthening long-term customer relationships. The company is also entering several higher value-added product categories, including steering columns, suspension systems, high-tensile products and braking systems, significantly expanding its addressable market. Management has already added multiple marquee customers across these businesses and expects them to become meaningful contributors over the next few years. Simultaneously, Belrise has approved the merger of two group entities into the listed company, which is expected to simplify the corporate structure, improve operational efficiencies and reduce related-party transactions.

Belrise is also building a promising long-term growth engine through its defence and aerospace business. During FY26, it acquired manufacturing facilities in France and the UK, enabling entry into the supply chain of some of the world's largest aircraft and aircraft engine manufacturers. The company is also empanelled with Indian and Israeli defence OEMs, positioning it to benefit from increasing localisation in aerospace manufacturing and India's growing defence spending. While the business currently contributes a small portion of revenue, it offers significant long-term optionality. On the financial front, the company remains well positioned to fund future growth. It generated operating cash flow of ₹817 crore and free cash flow of ₹207 crore during FY26. The balance sheet remains comfortable with a debt-to-equity ratio of just 0.24 despite ongoing expansion. On the valuation front, Belrise Industries trades at a PE of 42.4x compared with the industry average of 29.7x. The company delivered strong profit growth of 40 per cent last year, reflecting healthy execution and improving operating momentum. This robust earnings growth provides support to its premium valuation. It has also reported a ROCE of 14.5 per cent, ROE of 12.6 per cent and maintains zero promoter pledging. Hence, we recommend a BUY.

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