Goldman Sachs has initiated coverage on four Indian auto component manufacturers, saying the industry is entering a transformation phase as companies expand beyond conventional automotive components into semiconductor wafer fabrication equipment, aerospace, defence, electric vehicle components and data centre infrastructure.
The brokerage said it prefers companies that score well on content addition, business reinvestment, powertrain-agnostic exposure, capital allocation, margin stability and expansion into new growth adjacencies beyond traditional automotive markets. Against this backdrop, it initiated coverage on Sansera Engineering and Craftsman Automation with ‘Buy’ ratings, while assigning ‘Neutral’ ratings to Samvardhana Motherson and Bharat Forge.
Goldman Sachs on precision machining and auto parts
Goldman Sachs expects the Indian precision machining and auto parts industry to deliver a 10% revenue CAGR and 15% EBITDA CAGR between FY26 and FY30, driven by electrification, exports, the upcoming 8th Pay Commission, global supply-chain diversification and opportunities in defence, aerospace and semiconductors.
The brokerage said investors have largely viewed Indian auto component makers as cyclical businesses with limited pricing power and recurring capital expenditure. However, it believes a group of manufacturers is now diversifying into higher-value precision engineering businesses that can generate more resilient earnings while leveraging their manufacturing capabilities.
Goldman Sachs on Sansera Engineering: ‘Buy’
Goldman Sachs initiated coverage on Sansera Engineering with a ‘Buy’ rating and a 12-month target price of Rs 4,130, implying 28% upside.
The brokerage believes Sansera is entering the “harvesting phase” after nearly a decade of investments to diversify beyond conventional automotive components into semiconductor wafer fabrication equipment and aerospace precision machining. It expects the company’s increasing exposure to complex precision-engineered products to improve both earnings quality and profitability.
Goldman Sachs said, “After nearly a decade of preparatory efforts, SASE is entering the harvesting phase on its strategic pivot towards semiconductor wafer equipment parts (WFE) and aerospace parts, including engine blisks (under development).”
The brokerage expects structural sourcing by global semiconductor equipment manufacturers from India to expand Sansera’s addressable market, while continued outsourcing of legacy automotive components by Hero, Honda and global OEMs should support export growth and margin expansion.
It also believes the company’s differentiated positioning across automotive, semiconductor and aerospace machining provides a stronger long-term earnings profile than traditional auto component manufacturers.
Goldman Sachs forecasts Sansera’s earnings per share to grow 39% in FY27, 29% in FY28 and 34% in FY29. It expects EBITDA margin to improve to 21.6% in FY29 from 18.1% in FY26, while return on equity is projected to increase to 18% from 11% over the same period. The brokerage said its FY27 and FY28 earnings estimates are 8% above Bloomberg consensus.
It identified new semiconductor wafer fabrication equipment customer additions, stronger legacy automotive exports and tighter environmental regulations for the global trucking industry as key catalysts, while weaker semiconductor demand, faster electric vehicle adoption and slower domestic automotive demand remain the principal risks.
Goldman Sachs on Craftsman Automation: ‘Buy’
Goldman Sachs initiated coverage on Craftsman Automation with a ‘Buy’ rating and a 12-month target price of Rs 11,600, implying 27% upside.
The brokerage believes Craftsman is well positioned to benefit from rising global investment in AI-led data centres through its heavy-horsepower engine block business, while increasing aluminium content in vehicles, export opportunities and expansion into industrial applications provide additional growth drivers. Goldman Sachs also expects the acquisitions of DR Axion and Sunbeam Lightweighting to strengthen the company’s capabilities and improve margins over time.
Goldman Sachs said Craftsman is an “engine block specialist benefiting from global data center build-out” and expects the company to deliver strong operating leverage as its product mix shifts towards higher-value precision engineering.
The brokerage forecasts the company to deliver a 17% revenue CAGR, 25% EBITDA CAGR and 43% EPS CAGR between FY26 and FY29, supported by growth in engine blocks, aluminium die-casting, industrial storage solutions and exports.
Goldman Sachs on Samvardhana Motherson: ‘Neutral’
Goldman Sachs initiated coverage on Samvardhana Motherson with a ‘Neutral’ rating and a 12-month target price of Rs 148, implying 2% upside.
The brokerage said Samvardhana Motherson is India’s largest auto component supplier by revenue and market capitalisation, with a diversified global footprint and a powertrain-agnostic business model. It noted that the company has built a strong track record of acquiring distressed assets with customer order guarantees and turning them around, while also expanding into faster-growing businesses such as consumer electronics and aerospace.
However, Goldman Sachs believes these emerging businesses are still relatively small, contributing only about 10% of consolidated revenue by FY29, with around 90% of revenue continuing to come from slower-growing developed markets. That, coupled with current valuations, underpins its ‘Neutral’ stance.
Goldman Sachs said, “Emerging businesses + M&A hold key in mature operating backdrop.”
The brokerage expects Samvardhana Motherson’s earnings per share to grow 24% in FY27, 31% in FY28 and 11% in FY29. It forecasts EBITDA margin to improve to 9.9% in FY29 from 9.4% in FY26, while return on equity is projected to increase to 14% from 11% over the same period.
Goldman Sachs noted that its FY27, FY28 and FY29 EPS estimates are 4% below, 1% below and 1% above Bloomberg consensus, respectively. It identified a recovery in consumer electronics revenue, commissioning of Greenfield 3 and new acquisitions as key catalysts, while delays in scaling consumer electronics and aerospace businesses, acquisition turnaround issues and commodity inflation remain the principal risks.
Goldman Sachs on Bharat Forge: ‘Neutral’
Goldman Sachs initiated coverage on Bharat Forge with a ‘Neutral’ rating and a 12-month target price of Rs 2,120, implying 3% downside.
The brokerage believes Bharat Forge is well positioned to benefit from improving commercial vehicle demand in North America and Europe, rising defence execution and expansion in aerospace. However, it said much of this expected growth is already reflected in the stock’s valuation, limiting upside over the next few years.
Goldman Sachs said,”We believe that while the North American and European CV cycles are inflecting upwards and defense order execution is set to begin this year, much of this growth is already priced in, with limited visibility on growth beyond a 3-year period.”
The brokerage forecasts Bharat Forge’s earnings per share to grow 35% in FY27, 30% in FY28 and 24% in FY29. It expects EBITDA margin to improve to 20.1% in FY29 from 17.4% in FY26, while defence revenue is projected to increase to Rs 5,250 crore from Rs 1,750 crore by FY29, raising its contribution to total revenue to 22% from 9%.
Goldman Sachs lists that the key catalysts include fresh defence order wins across land, naval and aerial platforms, a recovery in North American and European commercial vehicle markets, commissioning of the Baramati aerospace ring mill facility and the company’s entry into explosives manufacturing.
On the risk side, it expects slower-than-anticipated wind-down of loss-making European operations and lower-than-expected margin expansion in the defence business due to start-up costs to weigh on earnings.
Conclusion
Goldman Sachs believes India’s auto component industry is entering a new growth cycle as manufacturers diversify into precision engineering for semiconductors, aerospace, defence, electric vehicles and data centre infrastructure.
The brokerage prefers Sansera Engineering and Craftsman Automation for their stronger exposure to these structural growth opportunities, while maintaining ‘Neutral’ ratings on Samvardhana Motherson and Bharat Forge, saying their current valuations already reflect much of the expected improvement in fundamentals.
Disclaimer: The stock ratings, price targets, and financial growth projections referenced in this report are based on coverage initiated by Goldman Sachs and are compiled strictly for informational, analytical, and educational purposes. They do not constitute investment advice, financial guidance, or an offer or solicitation to buy or sell any security. Investments in equity markets—particularly individual equities and mid-cap engineering firms—carry significant capital risk and market volatility. Price targets and forecast CAGRs are speculative estimates subject to industry, regulatory, and macroeconomic fluctuations. Readers should perform independent due diligence and consult a SEBI-registered investment advisor before making any financial commitments.
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