Jefferies raises Belrise Industries target price, sees 18% upside on strong demand, business expansion

Analysts at global brokerage firm Jefferies remain bullish on Belrise Industries and have reaffirmed their ‘Buy’ rating on the auto components and equipment manufacturer, citing strong new-order traction in the automotive segment and the company’s expanding presence in non-auto sectors such as renewable energy and aerospace.Jefferies analysts Nitij Mangal, Sagar Sahu, Kevin Verghese and Rishi Venkateswaran believe Belrise is well positioned to benefit from rising demand for two-wheelers in India. They expect increasing content per vehicle, along with expansion in four-wheelers and exports, to support the company’s growth.

For its base-case scenario, Jefferies has raised its target price on Belrise Industries to Rs 280 from Rs 250 earlier. The revised target is based on 27x September 2028E earnings per share (EPS), compared with the earlier valuation of 26x FY28E price-to-earnings (PE).

Shares of Belrise Industries closed at Rs 236.80, up 0.71% on Tuesday, August 18. Jefferies’ revised target price implies an upside of around 18% from the current market price.

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Q1 shows resilient operating performance

In its report, Jefferies said Belrise’s earnings before interest, taxes, depreciation and amortisation (EBITDA) grew 5% year-on-year, slightly ahead of its 4% estimate. Profit after tax (PAT) increased 9% YoY but was 6% below estimates, primarily due to lower financial income and a higher tax rate.

The company’s revenue grew 13% YoY, with a 20% increase in manufacturing revenue partly offset by a 19% decline in trading revenue.

Revenue grew 16-22% YoY across commercial vehicles, two-wheelers and passenger vehicles. However, two-wheeler revenue growth was slightly below the industry’s production growth of 23% YoY.

EBITDA margin increased 20 basis points sequentially but declined 90 basis points YoY, aided by a lower contribution from the trading business. Manufacturing margins, however, contracted 20 basis points QoQ and 110 basis points YoY.

Jefferies has cut its FY27 EPS estimate by 3% but has broadly retained its FY28-29 estimates. The brokerage expects Belrise to deliver a 21% EBITDA CAGR and a 25% EPS CAGR over FY26-29E, including earnings accretion from the merger of group entities in FY28.

“Its 29x 1-year forward PE appears rich, but we believe justified for healthy growth and an expanding business footprint,” the analysts wrote in the research note.

Cost pressures show signs of easing

Jefferies noted that Belrise had faced cost pressures over the past two quarters due to higher commodity and fuel prices, as well as increased transportation and labour costs.

The brokerage believes the worst of these cost pressures is now behind the company and has retained its expectation that FY27 margins will remain similar to FY26 levels.

Belrise has historically reported relatively low margin volatility, with EBITDA margins remaining in the 12-14% range during FY21-26, Jefferies noted.

New orders, expansion strengthen growth outlook

Belrise secured multiple new orders in the first quarter, including a chassis order from a fast-growing two-wheeler and three-wheeler OEM, two new OEM additions for braking and suspension products, and an electric vehicle localisation programme from a leading Indian four-wheeler OEM.

The EV programme covers 59 assemblies, along with tooling, fixtures and automation, according to Jefferies.

The company is also expanding its non-auto business. It recently secured an order in the renewable energy segment for sheet metal assemblies from a leading US solar tracker OEM, with peak revenue potential of more than ₹1.5 billion.

Following two recent acquisitions in France and the UK, Belrise has also entered the global aerospace components supply chain.

Jefferies noted that while non-auto revenue currently accounts for a small share of the business, the segment has the potential to meaningfully contribute to medium-term growth.

Customer concentration, margins remain key risks

Jefferies, however, flagged customer concentration and higher-than-expected margin pressure as key risks for the company.

The brokerage noted Belrise’s high dependence on its top customer and, based on industry characteristics, believes this customer to be Bajaj.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)