Analysts at JM Financial have reiterated their bullish stance on Tenneco Clean Air India, retaining their ‘Buy’ rating despite a hit to profits from the new labour code. The brokerage cited strong Ebitda margin expansion, robust order book growth, and premiumisation driving higher realisations. Analysts further expect the ongoing CV upcycle, export opportunities, and the upcoming greenfield capacity expansion to support sustained growth and margin improvements.
Saksham Kaushal, Nitin Agrawal, and Sahil Malik of JM Financial see a 16.4 per cent upside in the stock, setting a target price of ₹640 per share, valuing the company at 28x FY28E EPS.
Q3FY26 performance highlights
During Q3FY26, Tenneco Clean Air India reported adjusted PAT (excluding ₹27.2 crore related to the new labour codes) of ₹150 crore, up 16.5 per cent Y-o-Y but down 3.1 per cent Q-o-Q. Ebitda for the quarter rose 24.8 per cent Y-o-Y to ₹220 crore, with the Ebitda margin on Value Added Revenue (VAR) at 18.6 per cent, up 150bps Y-o-Y.
Ebitda margin expansion was driven by operating leverage, premiumisation, calibrated commercial actions, and effective cost management. Consolidated VAR for the quarter stood at ₹1,190 crore, up 14.7 per cent Y-o-Y. Within segments, the Clean Air and Powertrain VAR grew 5.4 per cent Y-o-Y to ₹560 crore, while the Advanced Ride Technology (ART) segment VAR increased 24.5 per cent Y-o-Y to ₹630 crore.
The ART segment growth was led by premiumisation trends. The company launched the DaVinci DCx suspension with a leading Indian PV OEM, with an annual revenue potential of around ₹220 crore. In the Clean Air and Powertrain segment, Tenneco secured a strategic aftertreatment program with a leading EU CV OEM, with an annual revenue potential of about ₹115 crore.
“The order book remains robust and well-diversified, providing visibility to generate double-digit CAGR over FY25-28E, with exports accounting for more than 20 per cent of the lifetime order book. The ongoing CV upcycle, sustained PV demand post-GST rationalisation, and tightening emission norms (CAFÉ-3) are expected to sustain growth momentum,” said the analysts in a report.
Kharkhoda greenfield plant to support scalability and margins
The planned Clean Air greenfield capacity expansion at Kharkhoda, Haryana, with production expected from 3QFY27, analysts said, will enhance medium-term scalability. Sustained premiumisation trends, improved realisations from the ongoing CV cycle, and higher exports following India-US (tariff down to 18 per cent from 50 per cent) and India-EU (duties down to zero from 3–8 per cent) agreements are expected to provide incremental growth and margin support.
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