Auto Ancillary Stock to Buy Now for an Upside of 32%; Recommended by HSBC

Synopsis: Small-Cap stock rated Buy by HSBC with a ₹700 target, is poised for strong growth driven by premium passenger vehicle suspensions, export expansion from India’s cost advantage, and steady domestic demand. FY26–FY30e forecasts include ~14% revenue/EBITDA CAGR, ~15% PAT CAGR, and stable 18–19% margins.

The shares of the Small-cap company specialising in designing, engineering, and manufacturing emission control systems and advanced powertrain components are in focus as HSBC has initiated with a Buy rating, with an upside potential of  32 percent.

With a market capitalization of 21,072.18 Crores in the day’s trade, the shares of Tenneco Clean Air India Ltd jumped by upto 0.37 percent, reaching a high of Rs. 531.00 compared to its previous close of Rs. 529.00.

Tenneco Clean Air India, engaged in designing, engineering, and manufacturing emission control systems and advanced powertrain components, is in focus after HSBC initiated with a Buy rating with the target price of Rs. 700.

Reason for the Target

• Strong exposure to premiumisation in suspension systems and export growth: The company benefits from the trend of customers preferring higher-end, technologically advanced suspension systems. This, combined with rising export demand, positions the company for strong top-line growth.
• Premiumisation of passenger vehicle suspensions drives ART growth: Upgrading suspension systems in passenger vehicles to premium variants is fueling the growth of the ART (Automotive Ride & Technology) segment, contributing to overall revenue expansion.
• India is positioned as a low-cost global export hub: India serves as a cost-effective manufacturing base for the parent company, enabling competitive pricing for exports and improving margins on international orders.
• Export revenue CAGR forecast at ~33% during FY26-FY30e: Exports are expected to grow rapidly, driven by global demand and India’s cost advantage, leading to a compound annual growth rate of approximately 33% over the forecast period.
• Domestic revenue CAGR estimated at ~12% over the same period: The domestic market is also expanding steadily, though at a slower pace compared to exports, with a projected CAGR of around 12% from FY26 to FY30e.
• Overall FY26-FY30e CAGR of ~14% for revenue and EBITDA: Combining domestic and export growth, total revenue and EBITDA are expected to grow at a healthy CAGR of about 14%, reflecting balanced expansion across markets.
• PAT CAGR estimated at ~15% over FY26-FY30e: Profit after tax is expected to grow slightly faster than EBITDA due to operational efficiencies and cost control, resulting in a projected CAGR of 15%.
• Margins expected to remain stable at ~18-19% over the medium term: Despite growth, operating margins are likely to remain steady in the 18–19% range, reflecting disciplined cost management and a favorable product mix.

Financials & Others

The company’s revenue rose by 14.23 percent from Rs. 1,125 crores in December 2024 to Rs. 1,285 crores in December 2025. Meanwhile, Net profit declined from Rs. 125 crores to  Rs. 119 crores in the same period.

The company demonstrates strong profitability, with a ROCE of 57.3% and ROE of 42.6%, indicating efficient use of both capital and equity to generate returns. Its debt-to-equity ratio of 0.02 reflects a very low reliance on debt, highlighting financial stability and minimal leverage risk.

Over the past three years, the company has maintained a consistent ROE of 37.6%, showcasing a reliable track record of shareholder value creation. Additionally, its healthy dividend payout of 56.4% underscores a commitment to returning profits to shareholders while sustaining growth.

Tenneco Group is a global Tier 1 automotive component supplier and a trusted partner for over 100 long-term customers. With a focus on highly engineered products and systems, the company serves the Automotive, Off-highway, and Industrial segments. Tenneco leverages a scalable platform and a high degree of localized manufacturing to meet the diverse needs of its global customer base.

The company operates an extensive global footprint, including 180 manufacturing plants and 39 R&D and technical centers across 28 countries, employing approximately 59,400 people. This network allows Tenneco to maintain a competitive cost position while ensuring scalable deployment of its solutions worldwide. 

Tenneco’s product portfolio spans multiple segments, including Clean Air (hot/cold end exhaust systems), Powertrain (pistons, piston rings, valves, bearings, and sealings), Ignition (spark plugs and ignition coils), and Performance Solutions (advanced ride solutions, braking, NVH, and systems protection). 

For 9M FY2026, the business is evenly split between two segments: Clean Air & Powertrain and Advanced Ride Technology, each contributing 50% to the overall operations. For 9M FY2026, the revenue was largely domestic, with 93.1% from domestic sales, 6.4% from exports, and 0.5% from other operating income.

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