Stock Target: 4 Key reasons why Sandhar Technologies is a good buy

Synopsis: Emkay initiates Buy on Sandhar Technologies Ltd with ₹825 target, implying ~50% upside, citing post-capex growth, 20% EBITDA CAGR, improving RoCE, and valuation discount potential ahead.

The shares of the Auto Ancillary company, specializing in the manufacturing and assembling of automotive components for the automotive industry in India, are in focus after the leading Indian Brokerage firm Emkay Global Services initiated a Buy Target with an upside potential of upto 50 percent.

With a market capitalization of Rs. 3,297 Crores, the shares of Sandhar Technologies Ltd are trading at Rs. 547.90 compared to its previous closing price of Rs. 548.30.

What Happened

Sandhar Technologies Ltd, engaged in designing, manufacturing, and supplying a wide range of automotive components and systems, is in focus after a leading Indian brokerage firm, Emkay Global Services, initiated a Buy Target of Rs. 825 on it with an upto 50 percent Upside Potential from the previous day’s closing price.

The reasons for the “Buy” target

STL Ready for Growth Post Capex Phase

STL has completed a deep capacity build-out over FY21-25 through both organic and inorganic routes and is now positioned to benefit from past investments. With peak capex behind, intensity is expected to moderate to ~4.5-5% of revenue over FY26E-28E (vs ~9% in FY21-25).

Growth drivers include a widening ADC portfolio (~5x domestic revenue in 5 years), scale-up of the sheet-metal segment (3.5x revenue), premiumization in smart locks (~10x ASP potential), and early traction in the incubated EV portfolio (Rs69mn in H1FY26).

Diversified Portfolio with Strong Growth Engines

Sandhar (STL) operates across sheet metal generating 19 percent of the revenue, die-casting (25% – 31% post-SCL), locks (20%), mirrors (5%), assemblies (11%), and cabins (14%) and serves 2Ws (62%), PVs (16%), and OHVs (14%).

The key growth drivers are ADC (~5x revenue growth over 5 years) and sheet metal (~3.5x growth), supported by targeted capex in new plants and upgraded facilities. It has Premiumization through smart locks (10x ASP vs mechanical).

Operational Reset Underway

The overseas losses halved via repricing, SKU rationalization, and labor optimization; breakeven targeted by Q4FY26. The exited loss-making JVs (Jinyoung, Kwangsung); remaining 5 core JVs are now PAT-positive (H1FY26 revenue +69% YoY) and contributing 5% PAT over FY26E-28E.

Financial Improvement & Attractive Valuation

The capex intensity moderates to ~Rs2.5-3bn (~4-5% of revenue in FY26-28E vs 9% on average, at peak), supporting RoCE improvement from 7-8% to ~16% by FY28E. They believe the Net debt-to-EBITDA is expected to decline to ~1.2x by FY28E; EBITDA CAGR ~20% (FY26E-28E). It currently trades at 12x Dec-27E PER with 54% below peer average; valuation gap expected to narrow with operational recovery and FCF generation.

The company’s revenue rose by 29.08 percent from Rs. 984 crores to Rs. 1,270 crores in Q2FY25-26. Meanwhile, Net profit rose from Rs. 40 crores to Rs. 73 crores in the same period.

The company demonstrates strong financial performance, with a ROCE of 12.3% and ROE of 12.8%, indicating efficient capital utilization. Its stock appears reasonably valued compared to the industry, trading at a P/E of 19.3 versus the industry’s 30.2, and a low PEG ratio of 0.55 suggests potential for further growth and the debt-to-equity ratio of 0.78 reflects a manageable level of leverage.

Over the past five years, the company has delivered impressive profit growth, achieving a 19.7% CAGR. It has also maintained a consistent and healthy dividend payout of 17.8%, highlighting its commitment to returning value to shareholders.

Sandhar Technologies Ltd. is a leading Indian auto component manufacturer, established in 1987, known for innovative safety, security, and structural parts for various vehicle segments (2-wheelers, 4-wheelers, CVs, Off-Highway). 

They specialize in locking systems, vision systems, stampings, die-casting (zinc, aluminum, magnesium), polymer parts, and coatings, serving major OEMs globally and growing steadily by focusing on innovation, sustainability, and customer needs. 

In Q2 FY26, the company’s revenue was distributed across products with ADC Domestic leading at 21.9 percent, followed by Locking Systems at 18.4 percent and Sheet Metal at 16.8 percent. Cabins & Fabrication contributed 11.1 percent, Assemblies 9.8 percent, ADC Overseas 9.3 percent, Vision Systems 5 percent, and Others accounted for 7.7 percent of the total revenue.

The company has long-standing relationships with 79 Indian and global OEM customers, including leading companies such as Ashok Leyland, Doosan Bobcat, Escorts, Hero, Honda Cars, Komatsu, Scania, TAFE, Tata Motors, TVS, UM Lohia, and Volvo.

Over the last few years, the company has expanded its client base to include OEMs such as Caterpillar, CTS, Hyundai Construction, International Tractors, JCB, Kobelco, Mahindra & Mahindra, and SML Isuzu. These long-standing and growing relationships demonstrate the company’s ability to successfully serve and meet customer requirements.

Disclaimer

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post Stock Target: 4 Key reasons why Sandhar Technologies is a good buy appeared first on Trade Brains.