Indian auto components sector domestically had seen a robust growth of 12% CAGR between FY06-13 primarily driven by a strong demand for PVs, CVs and two-wheelers, according to ICICIdirect.

''Given that 2/3rds of auto-component revenues come from the domestic OEM market and our view of a robust turnaround (15% CAGR FY14-17E) in OEM sales bodes well for the auto component players,'' it said.

''Our historical analysis reveals that since twice previous strong demand cycles in FY04/FY11 the auto components industry has managed to increase capacities by 1.8x since 2010 and with peak asset turn to be 2x has headroom of more than 50% to increase revenues without major capital expenditures. Looking at the Balance sheet side the industry gross D/E has also been moderating at 0.7x,'' said ICICIdirect.

''Thus we believe that auto-component players are well poised to leverage operating benefits from the cyclical turnaround in auto sales,'' it opined.

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