diff --git a/sphinx/_templates/local_md_files.html b/sphinx/_templates/local_md_files.html
index d668758e..a44b6bef 100644
--- a/sphinx/_templates/local_md_files.html
+++ b/sphinx/_templates/local_md_files.html
@@ -13,7 +13,19 @@
 
 {% if local_md_headings %}
 <div class="local-md-headings">
-  <h3>Overview</h3>
+  <h3>Current Folder</h3>
   {{ render_headings(local_md_headings) }}
 </div>
 {% endif %}
+
+{% if local_subfolders %}
+<div class="local-subfolders">
+  <h3>Subfolders</h3>
+  <ul>
+    {% for item in local_subfolders %}
+      <li><a href="{{ pathto(item.link) }}">{{ item.text }}</a></li>
+    {% endfor %}
+  </ul>
+</div>
+{% endif %}
+
diff --git a/sphinx/extensions/local_subfolders.py b/sphinx/extensions/local_subfolders.py
index 390561c1..50524836 100644
--- a/sphinx/extensions/local_subfolders.py
+++ b/sphinx/extensions/local_subfolders.py
@@ -1,7 +1,6 @@
 import os
 import re
 from sphinx.util import logging
-from docutils.parsers.rst import Directive
 from .nav_utils import natural_sort_key, extract_headings_from_file, group_headings, sort_tree, MAX_HEADING_LEVEL, DEFAULT_MAX_NAV_DEPTH
 
 logger = logging.getLogger(__name__)
@@ -9,9 +8,11 @@ logger = logging.getLogger(__name__)
 def collect_subfolder_tree(dir_path, base_url, current_depth, max_depth):
     """
     Recursively collects navigation items from subdirectories.
-    For each subfolder, it looks for a candidate file (prefer "index.rst" then "README.md")
-    and extracts its first level‑1 heading as the title. If no candidate or heading is found,
-    the folder name is used.
+    For each subfolder, it looks for a candidate file (prefer "index.rst" then "README.md").
+    Only subfolders with such a file will be included.
+    If a candidate is found, the first level‑1 heading from that file is used as the title;
+    if no heading is found, the folder name is used.
+    The link is built pointing directly to the candidate file (by its base name) rather than the folder.
     Returns a list representing the subfolder tree.
     """
     items = []
@@ -24,32 +25,34 @@ def collect_subfolder_tree(dir_path, base_url, current_depth, max_depth):
                 if os.path.isfile(candidate_path):
                     candidate = candidate_path
                     break
+            # Only include the folder if a candidate file was found.
             if candidate:
                 headings = extract_headings_from_file(candidate, max_level=MAX_HEADING_LEVEL)
                 title = headings[0]['text'] if headings else item
-            else:
-                title = item
-            link = os.path.join(base_url, item)
-            entry = {
-                'level': 1,
-                'text': title,
-                'link': link,
-                'anchor': '',
-                'priority': 0,
-                'filename': item
-            }
-            if current_depth < max_depth:
-                children = collect_subfolder_tree(full_path, os.path.join(base_url, item), current_depth + 1, max_depth)
-                if children:
-                    entry['children'] = children
-            items.append(entry)
+                # Use the candidate file's base name as link target.
+                candidate_base = os.path.splitext(os.path.basename(candidate))[0]
+                link = os.path.join(base_url, item, candidate_base)
+                entry = {
+                    'level': 1,
+                    'text': title,
+                    'link': link,
+                    'anchor': '',
+                    'priority': 0,
+                    'filename': item
+                }
+                if current_depth < max_depth:
+                    children = collect_subfolder_tree(full_path, os.path.join(base_url, item), current_depth + 1, max_depth)
+                    if children:
+                        entry['children'] = children
+                items.append(entry)
     return items
 
 def add_local_subfolders(app, pagename, templatename, context, doctree):
     """
     Collects a tree of subfolder navigation items from the current directory.
-    For each subfolder, the title is determined by scanning for a candidate file (prefer "index.rst" then "README.md")
-    and extracting its first level‑1 heading, or using the folder name if none is found.
+    For each subfolder, the title is determined by scanning for a candidate file
+    (prefer "index.rst" then "README.md") and extracting its first level‑1 heading,
+    or using the folder name if none is found.
     The resulting tree is stored in context['local_subfolders'].
     """
     srcdir = app.srcdir
@@ -66,6 +69,5 @@ def add_local_subfolders(app, pagename, templatename, context, doctree):
     context['local_subfolders'] = subfolder_tree
 
 def setup(app):
-    # Do not add the config value here to avoid conflicts.
     app.connect('html-page-context', add_local_subfolders)
     return {'version': '0.1', 'parallel_read_safe': True}