Auto ancillary shares in focus; Rane Brake zooms 20%, Minda hits new high

Analysts observe ancillaries with high exposure to replacement channel tyre, battery players) have fared relatively better in Q1FY22

Shares of auto ancillary companies, including auto parts & equipment producers and tyre manufacturers,were in focus on the bourses on Tuesday with six stocks hitting 52-week highs while two stocks -- Minda Corporation and Minda Industries -- touched their respective record highs on the BSE.

According to analysts, ancillaries with high exposure to replacement channel (tyre, battery players) to have fared relatively better in April-June quarter of Fy22 (Q1Fy22) despite the original equipment manufacturer (OEM) channel experiencing volume weakness.

Individually, Rane Brake Linings surged 20 per cent to Rs 1,144 on the BSE in the intra-day trade, followed by Rane (Madras) by 14 per cent to Rs 457, Rane Holdings (12 per cent at Rs 743), LG Balkrishnan & Bros (10 per cent at Rs 499) and Minda Corporation (8 per cent at Rs 136).

Meanwhile, MRF, JK Tyre, Apollo Tyre, Ceat and TVS Shrichakra, from the tyre sector, gained between 2 per cent and 4 per cent on the BSE. In comparison, the S&P BSE Sensex was up 0.78 per cent at 52,780 points at 02:25 pm.

Introduction of schemes like production-linked incentive (PLI) and vehicle scrappage policy is likely to increase the competitiveness of the Indian automotive industry globally, believe analysts, who opine more help is required to attract investments and boost exports as an increase in cases of Coronavirus infection and the consequent restrictive measures imposed by the government could derail growth prospects.

On the other hand, widespread vaccination campaigns being run by the government may control the pandemic resulting in expanded economic activity, they say.

ICICI Securities believes reliance on exports markets is thought to have offered comparative insulation to the likes of Balkrishna Industries while global presence is seen leading to relatively steady performance at Motherson Sumi. "Minda Industries is expected to outperform base user industries (2-W, 4-W) given its focus on kit value growth. The ancillary pack is seen posting 11.8 per cent sequential revenue decline accompanied by ~150 basis points (bps) quarter on quarter (QoQ) margin dip to 12.3 per cent," the brokerage firm said in sector Q1FY22 result preview.

"The outlook for the financial year 2021-22 (FY22) will certainly depend on how fast the vaccination is done throughout the population. We are cautiously optimistic for FY22 due to higher spend in infrastructure, PLI scheme, scrappage policy and the work done so far within the Company to make it more nimble, agile, future ready with best-in-class leading quality of products of advanced technology through innovation for our customers," Minda Corporation said in FY21 annual report.