Neutral SONA BLW Precision Forging; target of Rs 630: Motilal Oswal

Motilal Oswal's research report on SONA BLW Precision Forging

SONA BLW Precision Forging (SONACOMS)’s 4QFY24 operational performance was in line, while lower tax led to a PAT beat. It continues to focus on reducing its dependence on the pure ICE segment, as it now contributes just 10% of the revenue vs. 25% in FY21. Further, management’s guidance of an increase in R&D spending by 100bp in FY25 indicates its focus on product development and continuous innovation.

Outlook

Despite the volatile geopolitical scenario impacting different key geographies globally, SONACOMS reported a PAT growth of 32% YoY in FY24, driven by healthy order execution and its focus on the growing EV segment. SONACOMS remains a good proxy play for the global electrification trend, with a 29% revenue mix from EVs and a 79% mix in the order book. Moreover, its focus on expanding the product portfolio, global scale, and customer base should translate into strong earnings growth and healthy capital efficiency. However, valuations at 54x/45x FY25E/FY26E consol. EPS largely factor in these positives. Reiterate Neutral with a TP of INR 630 (based on 45x Mar’26E consol. EPS).