Shares of Sona BLW Precision Forgings Ltd (Sona Comstar) climbed over 10 per cent in Thursday's trade, while those of Escorts Kubota's fell nearly 10 per cent after the former announced acquisition of the Railways Equipment Division of the latter for Rs 1,600 crore.
Escorts Kubota said the objective of the sale is to align with the vision of Global Kubota, and exit from non-core businesses. Following this, Nuvama has reduced its FY26–27 EPS estimates by 5–8 per cent for Escorts Kubota as it felt the loss of Railway profit may be only partially offset by increase in other income.
"Despite this development, we retain positive view on robust medium-term prospects due to Global Kubota’s support in the form of a merger of Kubota India trading entity, technology support and opening up of export opportunities. We expect revenue/EPS CAGR of 17 per cent/20 per cent over FY24–27E," it said.
Escorts has retain ‘Buy’ with a target price of Rs 4,650 against Rs 5,000 earlier.
In the case of Sona BLW, Nuvama said the deal is EPS-accretive as it implies a reasonable FY26E EV/Ebit valuation of 7 times. This acquisition leads to diversification to the Railway space, which has considerable entry barriers, it said.
"This acquired entity is the market leader in braking systems, and also supplies couplers, suspension and other parts. Furthermore, it’s RoCE is 35 per cent. We expect this entity to contribute 17 per cent/1 per cent% to Sona’s FY27E revenue/Ebitda," it said.
Nuvama retained its ‘Buy’ rating on Sona BLW with an unchanged TP of Rs 780 based on 50 times Sep-26E EPS for core and 25 times September 2026E EPS for the Railway business.
Shares of Sonal BLW Precision Forgings climbed 10.48 per cent to hit a high of Rs 709.80 on BSE. Escorts Kubota shares fell 9.65 per cent to Rs 3,345.15.
MOFSL said despite the volatile geopolitical scenario impacting different key geographies globally, Sona Comstar reported PAT growth of 20 per ecnt YoY in 2QFY25, driven by healthy order execution and its focus on the growing EV segment.
"However, valuations at 60 times/48 times FY25E/FY26E consolidated EPS largely factor in these positives. Reiterate Neutral with a target price of Rs 685 (based on 46 times Sep’26E consolidated EPS)," it said.