Buy Tenneco Clean Air India, says JM Financial; flags top growth drivers

Brokerage firm JM Financial has turned bullish on emissions control systems and powertrain components manufacturer Tenneco Clean Air India (TCAIL) and initiated coverage on the stock with a Buy rating.

 

Saksham Kaushal, Nitin Agrawal, and Sahil Malik, analysts at JM Financial, expect the company to deliver solid growth over FY25–28, with a compound annual growth rate (CAGR) of 14 per cent in Value Added Revenue (VAR), 16 per cent in earnings before interest, taxes, depreciation, and amortisation (Ebitda), and 17 per cent in profit after tax (PAT). 

 

The growth, they said, will be driven by higher cost per vehicle (CPV) amid upcoming emission norms, a shift towards premium offerings, deeper market penetration, and a rising contribution from exports. 

 

 

“We expect TCAIL to deliver a CAGR of approximately 14 per cent/16 per cent/17 per cent in VAR/Ebitda/PAT over FY25–28E, driven by higher CPV due to upcoming emission norms, premiumisation, deeper customer penetration, and rising export contribution,” the analysts wrote in a research note.

 

The brokerage has set a target price of ₹610 per share, based on 28 times FY28E earnings. Analysts said TCAIL is currently trading at 24.8 times FY28E EPS, compared with the mean of 27.3 times for its peers. Amidst this, the company’s shares were seen trading at ₹527.20 per share, up 1.27 per cent from its previous close. 

Expanding TAM across segments

According to JM Financial, the clean air solutions market for passenger vehicles (PVs) is projected to grow at a 6–8 per cent CAGR over FY25–30E to reach ₹4,650–5,100 crore. 

 

For the CV/Off-Highway (CVOH/SCV) segment, analysts believe the market is set to expand at 13–15 per cent and 5–7 per cent CAGR to ₹2,540–2,780 crore and ₹710–780 crore, respectively. They project the domestic PV OE and aftermarket suspension market to grow at 8–10 per cent and 5–7 per cent CAGR over FY25–30E.  ALSO READ | Nifty Realty index surges 6% in 1 month; what's driving real estate stocks?

Stricter emission norms to lift CPV

Stringent emission norms are driving higher CPV in the clean air segment, analysts said. The introduction of CAFÉ norms and BS VII emission standards is expected to elevate CPV.

 

JM Financial estimates that CAFÉ norms will increase CPV for the PV segment by ₹1,000–1,500. In CVs, CPV is expected to rise by around ₹2,000 to comply with BS VII standards. TCAIL secured a major clean air systems win with a leading Japanese PV OEM in India in 2QFY26, marking its entry into a previously untapped segment for this OEM.

Premiumisation to boost CPV

The brokerage further highlighted that the Indian PV market has witnessed a clear trend of premiumisation over the past decade. The UV mix has risen from 34.6 per cent in FY20 to 65.4 per cent in FY25. Analysts expect this ongoing trend to benefit TCAIL’s PV clean air segment, as CPV is 1.5 times higher in large SUVs compared with small cars.

 

“In ART for PVs, premiumisation is driving CPV growth as advanced suspension adoption accelerates. CPV for Passive Plus and Semi-Active systems is approximately 2x and 4x higher than conventional passive systems, highlighting strong value potential,” JM Financial said.  ALSO READ | APL Apollo gets target price hike from Antique; 'Buy' rating maintained

Exports contribution to rise

Tenneco Global, analysts said, is positioning its India operations as a strategic export hub to serve global demand. Leveraging India’s cost competitiveness and the China+1 trend, the company plans to scale exports to about 20 per cent of VAR by FY30, up from 6 per cent currently.  ================ 

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