Whalesbook
The auto ancillary sector saw strong growth in the fourth quarter of fiscal year 2026. Volumes across two-wheelers, passenger vehicles, and tractors rose an estimated 23% year-on-year. Greaves Cotton's revenue increased by 21.5% to ₹1,000 crore, aligning with this positive trend. The company also significantly improved its operational performance, with EBITDA climbing 48.3% to ₹68 crore. This boosted the EBITDA margin to 6.8%, up from 5.6% a year earlier. Despite these gains, net profit for the quarter decreased by 6.3% to ₹22.5 crore. This decline may be linked to factors such as higher non-operational expenses or taxes.
Compared to peers, Greaves Cotton's trailing twelve-month price-to-earnings (P/E) ratio of 18.24 is considerably lower than Cummins India's 62.68. The average P/E for the sector is around 42.00. However, valuation figures for Greaves Cotton can vary, with some sources showing much higher P/E ratios, suggesting differing views on its value. The company's market capitalization is approximately ₹3,900-4,000 crore. This quarter's results stand in contrast to the fourth quarter of fiscal year 2023, which saw an 823% surge in net profit, highlighting the company's profit volatility.
The stock market responded positively to the revenue and margin story, with Greaves Cotton shares closing up 2.82% on the BSE. However, the company's stock has underperformed significantly over the past year, dropping 46.53% while the S&P 500 gained 14.11%. It is currently trading below key moving averages, indicating ongoing selling pressure. Valuation remains a point of discussion due to the wide range of P/E ratios reported. Analyst sentiment is mixed, with a consensus target price of ₹155.00, which is below the current market price, suggesting limited immediate upside potential. Additionally, foreign institutional investors have reduced their holdings in the recent quarter. The auto ancillary sector faces potential margin pressures in fiscal year 2027 due to rising input costs and geopolitical risks, which could affect Greaves Cotton's future profitability.
Looking ahead, Greaves Cotton is pursuing its 'GREAVES.NEXT' strategy. This plan focuses on diversifying into Energy, Mobility, and Industrial solutions, with a strong emphasis on electric mobility through its subsidiary, Greaves Electric Mobility (GEML). The company aims to increase its market share in the EV segment to 4.4% by FY26. Analysts generally recommend the stock, with a consensus rating of 'Strong Buy' and a 3-month target of ₹180.0 from ICICI Direct. Greaves Cotton plans to invest ₹500–700 crore to achieve a compound annual growth rate (CAGR) of 16-20% and target EBITDA margins of 13-15%.