5 Undervalued Auto Ancillary Stocks to Keep on Your Watchlist

The auto sector is back in the spotlight in the stock market, but most people are only chasing the big names like Tata, Mahindra, or Maruti.

But without the ancillaries, none of those cars, bikes, or EVs would even roll off the line.

These are the companies making the brakes, wiring, castings, electronics...the stuff that actually keeps the industry moving.

And right now, a handful of these stocks are trading cheaper than they should.

Here are 5 undervalued auto ancillary stocks that the market may be overlooking right now.

#1 Amara Raja Energy & Mobility

First on the list is Amara Raja Energy & Mobility, one of the India's largest manufacturers of lead-acid batteries.

This core business encompasses both automotive batteries and commercial vehicles - with an annual capacity of 66 million (m) units - and industrial batteries, used in sectors such as Telecom, Railways, Power Control, Solar, and UPS.

The company has market leadership in the telecom and data centre industries with a total capacity of around 3 billion (bn) Ah.

It has recently forayed into the New Energy Business (NEB), initiated in 2022 with a substantial capital expenditure plan to establish a Giga Corridor in Telangana.

The NEB focuses on lithium-ion cell and pack manufacturing, developing EV charging products, and providing energy storage solutions.

The company exporting to over 50 countries.

Coming to its financial performance, it has delivered a 13% compounded annual growth rate (CAGR) in revenue over 3 years and a net profit CAGR of 20%.

The last 3-year return on equity (ROE) has been 14%.

Coming to its valuations, the stock is trading at 2.4 time its book value compared to the industry average of 3.2 times.

Similarly, the price to earnings (PE) ratio of the stock is 21 compared to the industry average of 36.

Looking ahead, the management expects the aftermarket for four-wheelers to grow around 6-7%, while the two-wheeler segment is anticipated to grow by about 10-11%.

For industrial UPS batteries, an annualised growth of 5-6% is expected.

While the company aims for exports to grow around 15%, this year might see subdued performance due to supply challenges and tariffs, with the first quarter already showing a contraction.

In the industrial segment, the telecom sector is seen as a migration story from lead-acid to lithium. The company intends to maintain more than 50% market share in telecom and UPS.

In terms of margins, the management indicated that 1Q FY26 and 4Q FY25 were the "worst" seen, suggesting an expectation for improvement from here.

This improvement is anticipated as antimony prices stabilise and some power-related issues are expected to be resolved in a few months.

The start of manufacturing activities at the tubular factory in July 2025 will reduce reliance on trading for home UPS tubular batteries, which previously diluted margins.

The battery breaking operations at the recycling plant are expected to commence in 3Q FY26, which should further aid in margin improvement by integrating lead recycling.

The company continues its significant investment in the NEB. The management projected a capital expenditure of Rs 12-13 bn for FY26, with a substantial portion of Rs 8-9 bn allocated to NEB projects, and the remainder for lead-acid battery operations.

For more details, check out Amara Raja Energy & Mobility's financial factsheet.

#2 Steel Strips Wheels

Coming second on the list is Steel Strips Wheels, a leader in designing and manufacturing automotive wheels, including both steel and alloy wheels.

The company has delivered a top-line growth of 8% CAGR over 3 years and a net profit CAGR of 1%.

The last 3-year average ROE has been 17%.

Regarding the valuations, the stock is trading at 2.1 times its book value compared to the industry average of 5.1 times.

Similarly, the PE ratio of the stock is 16 compared to the industry average of 36.

Looking ahead, the management expects volume growth to be between 9% and 10%, with value growth potentially higher due to the performance of alloy, commercial vehicle (CV), and export segments.

The alloy wheel market is projected to grow at a faster rate of 12% per annum over the next five years compared to the steel wheel market's 4%. The company aims for a mid-to-high double-digit growth in the alloy wheel segment.

The top-line growth for the current financial year depends on customer volumes.

Regarding order books, it recently secured a nomination for Rs 3 bn in steel wheel business from European OEMs.

This move is part of a deliberate strategy, initiated about two years ago, to diversify its export business and reduce over-reliance on the US.

New projects have also been secured in the South American region. For its aluminium knuckle segment, the company anticipates an order book of about 900,000 units for FY27.

The management has planned a capex of Rs 2.8-3 bn for FY26, primarily for alloy wheel and knuckle expansion. It has projected the net debt to be in the range of Rs 8.5-9 bn by the end of the financial year.

For more details, check out Steel Strips Wheels' financial factsheet.

#3 Uniparts India

At number three comes Uniparts India, a leading global supplier of critical components and system solutions primarily for the Off-Highway Vehicle (OHV) industry.

The company specialises in the manufacture of Three-Point Linkage (3PL) systems. It holds a market leadership position for small tractors (under 70 HP) worldwide, and Precision Machined Parts (PMP).

These two product verticals constitute the majority of their finished goods sales, with PMP contributing about 50% and 3PL about 47%.

Additionally, Uniparts is expanding its offerings to include synergistic products such as fabrication, Power Take-Off (PTO) units, and hydraulic cylinders, aiming to diversify its product portfolio and deepen its engagement within the vehicle systems.

Coming to its financial performance, the company has delivered a top-line growth of -8% CAGR over 3 years and a net profit CAGR of -20%.

The last 3-year ROE has been 17%.

Regarding the valuations, the stock is available at 2.1 times its book value compared to the industry average of 4.6.

Similarly, the PE ratio of the stock is 20 compared to the industry average of 53.

Looking ahead, the management expects to achieve mid-teens growth for FY26.

While the Off-Highway Vehicle (OHV) industry continues to face volatility, particularly with tariff uncertainties in the Americas, there are early signs of recovery in Europe.

Regarding the order book, the company's new business award book remains healthy at over Rs 2 bn.

The company has an aspiration to reach Rs 20 bn in revenue as per its 5-year plan.

The management expects earnings before interest, taxes, depreciation, and amortization (EBITDA) to be around 18% for FY26 if performance continues as anticipated.

For more information, check out Uniparts India's financial factsheet.

#4 Sterling Tools

Fourth on the list is Sterling Tools, primarily an automotive fasteners business, where it's a leading player known for strong, long-standing relationships with major OEMs.

The standalone fasteners business has shown stability and continued to grow at a faster pace than the industry.

The company has strategically diversified into the autonomous, connected, and electric (ACE) mobility space.

The company is pursuing product diversification to enhance its value proposition within the EV ecosystem and secure a first-mover advantage for many of these products in India, which are currently imported.

It aims to replace these imported components with "Made in India" products, leveraging strategic alliances and in-house engineering capabilities.

Coming to its financial performance, the company has delivered a top-line growth of 26% CAGR over 3 years and a net profit CAGR of 33%.

The last 3 years ROE has been 12%.

Regarding the valuations, the stock is trading at 2.3 times its book value compared to the industry average of 4.9 times.

Similarly, the PE ratio of the stock is 24 compared to the industry average of 39.

The company continues to grow at a faster pace compared to the industry.

Looking ahead, the fasteners business is projected to maintain a stable growth trajectory, driven by new customer additions and deeper market penetration.

It has already begun to see early traction from newly acquired customers, including Hyundai, which is expected to support incremental growth in the coming quarters.

Overall, for the non-fastener businesses in the ACE mobility space, the company anticipates a revenue buildup that will start happening anywhere in the next 2 to 5 years, with a long-term vision of 3 to 10 years.

The total revenue potential for all these new businesses combined could range between Rs 5 to 10 bn, depending on market penetration and customer adoption in the EV ecosystem.

The company plans a total investment of between Rs 1.5 to 2 bn in the next 3 years across its different non-fastener businesses.

For more information, check out Sterling Tools' financial factsheet.

#5 Kross

Fifth on the list is Kross, a prominent manufacturer of trailer axles and suspension assemblies in India.

Its diversified product portfolio includes high-performance and safety-critical components for both the Medium & Heavy Commercial Vehicle (M&HCV) and farm equipment segments.

For the first quarter of FY26, Kross Limited's revenue was split with 40% from the trailer axles and suspension business and 60% from the component business.

Coming to its financial performance, the company has delivered a top-line growth of 28% CAGR over 3 years and a net profit CAGR of 58%.

The last 3-year ROE has been 25%.

Regarding the valuations, the stock is available at 2.5 times its book value, which is lower than the industry average of 4.9 times.

Looking ahead, the management is looking at least 10-12% increase in the top line for FY26, potentially even 15%, driven by new product lines and strategic initiatives.

Meaningful revenue contribution from the seamless tube facility is expected to start from FY28 onwards. The sale of surplus seamless tubes could contribute approximately Rs 6 bn in the next 2-3 years.

A new extrusion line is being set up, which will increase axle manufacturing capacity from 5,000 to 7,500 units per month. Commercial production is expected to commence in 3Q FY26. Initial utilisation is projected around 60-65% for FY26.

A seamless tube facility is under construction, with completion targeted by December 2025 and commercial production by 4Q FY27.

This facility will primarily serve captive requirements for trailer axles and parts, further backward integrating operations and reducing reliance on external vendors.

For more information, check out Kross' financial factsheet.

Conclusion

These five companies might not be front-page names, but their businesses are deeply tied to the future of India's auto ecosystem.

Each one combines solid fundamentals with valuations that suggest the market hasn't fully woken up to their potential.

The key is not just spotting value but tracking execution, order flow, and how well managements deliver on what they've promised.

Investors should conduct due diligence, paying attention to financial performance, order visibility, execution risks, and corporate governance before making any investment decisions.

Happy investing.

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