In the midst of slowdown in the core auto sector where most auto companies are reporting low sales figures, specially cars and heavy vehicles, auto ancillary companies to our surprise has been posting a phenomenal set of numbers. Most of the auto ancillary companies numbers I’ve seen have posted a strong set of numbers for Q1 FY12. For example, take a look at what some of these companies reported as profits.

Steel Strips Wheels reported a 60% growth in profits, Sona Koyo reported 40% standalone profit growth and 400% consolidated profit growth, Jamna Auto reported 40% growth in profits, Rane Madras gave a 30% profit growth, JMT Auto grew 85% in profits, Suprajit Engineering grew 35% in profits.

So from the above figures, it is clear that auto ancillary stocks are someway performing really well in terms of growth. Even if these stocks give less growth in coming quarters, the kind of results given in first quarter alone will lift up the full year EPS to a pretty good percentage. In FY13, we’re expecting auto companies to report much better set of numbers than FY12, so it is wise to assume that auto ancillary should do good next year as well when rate interests peak out and start coming down. The most important thing here is, despite of such good results, these companies are trading at all time low levels but that might have to do with the slowdown expectation in auto sector. I feel that any recovery in the markets should lift up the valuations of many of these companies that are reporting good set of numbers. I’ll advice to start accumulating some of these scrips from a long term view at current levels.

Amongst Auto Ancillary stocks, my top picks are Sona Koyo, Steel Strips Wheels and Suprajit Engineering. They have been very consistent in terms of growth and the outlook is also very good.

Related posts:

1. Avoid Auto Stocks
2. Buy Autoline Industries
3. Buy Sona Koyo Stock
4. Buy Steel Strips Wheels Stock
5. Buy Sona Koyo stock