Sona BLW Precision shares at Rs 470 or Rs 700: What analysts say on EV play

Sona BLW Precision Forgings Ltd (Sona Comstar) saw a robust order book and strong show in the June quarter. A gradual easing in supply constraints coupled with strong net order book is expected to aid growth for the auto component maker going ahead. But the target prices on the counter vary, as a few analysts see the prevailing market price may be capturing in most positives.

Nuvama Institutional Equities has a target of Rs 470 on the stock. Motilal Oswal sees the scrip at Rs 600. JM Financial finds the stock worth Rs 700 while Phillip Capital pegs it at Rs 703.

Sona Comstar remains a good proxy play for the global electrification trend, with a 26 per cent revenue mix from EVs and a 78 per cent mix in the order book.

On Friday, the stock fell 3.65 per cent to hit a low of Rs 570 on BSE.

Sona Comstar reported a 47 per cent jump in consolidated net profit Rs 112 crore for the June quarter. The auto ancillary company said its revenue from operations rose to Rs 731 crore in the first quarter compared with Rs 584 crore YoY.

The stock’s valuation at 45 times FY25 earnings per share factors in most positives, said Nuvama, adding that a sustained outperformance of this magnitude is improbable in the long run due to scale disadvantage and challenges in sustaining market share.

Motilal Oswal said valuations at 66.2 times FY25 EPS and 50.8 times FY24E/FY25E EPS largely factor in positives

"We raise our target multiple from 40 times to 45 times September 2025 EPS, to reflect the improved visibility and return to strong growth path. Maintain Neutral with a target of Rs 600," it said.

Motilal Oswal said Sona Comstar is firmly back on strong growth path led by a recovery in the underlying markets and a strong order book. It said the focus on expanding the product portfolio, global scale, and customer base should translate into strong earnings growth and healthy capital efficiency. But it is vary of the stock's valuation. 

Near term risks to the stock includes adverse macro conditions impacting the global auto industry as well as FAME subsidy impact on sale of traction motors, said Phillip Capital.

"That said, the company continues to add new customers/programs/products in its portfolio. The latest being higher power density motors with the “spoke motor architecture” which are more compact, lighter and easier to pack. Commercial production for these should start in CY25 as per the management. We reiterate our favourable view on the stock," Phillip Capital said as it suggested a target of Rs 703 on the stock.

The brokerage sees new product introductions with significant potential, adding that product portfolio has been aligned with rapid electrification globally.

Sona Comstar could also gain from addition of new segment through Novelic acquisition and Equipmake tie-up.

"Higher operating leverage is expected to support margins going ahead (LT guidance remains in the range of 25-27 per cent). Diversified revenue, increasing share of EVs and strong order book makes Sona Comstar one of the best plays in the EV space," JM Financial said while suggesting a target of Rs 700 on the stock.

 

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