Sona BLW Precision Forgings rallied 5 percent on October 26 morning after the auto-component maker reported its highest-ever quarterly revenue and net profit for the July-September quarter (Q2FY24) period.
The company reported a 34 percent on-year rise in net profit at Rs 124 crore, while revenue was up 20 percent at Rs 787 crore.
Global brokerage firm Jefferies gave a “buy” call on the counter with a target price of Rs 700 a share after the Q2 report card exceeded estimates.
“The company’s Q2 performance was 7-13 percent above our predictions. The company has added several components across differentials, motors, sensors, and emphasized on addressing evolving trends in mobility,” Jefferies’ analysts wrote in a post-result review note.
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Sona BLW registered a significant increase in its battery-related revenue (BEV), accounting for 27 percent of the total revenue. BEV-linked revenue rose 58 percent on-year in the September-ended quarter.
Analysts at Motilal Oswal said the company stands as a good proxy play for the global electrification trend, with 27 percent revenue mix from EVs and 78 percent in the order book.
The brokerage firm has a “neutral” stance on the counter, with a target price of Rs 565 a share.
Valuation-wise, the company stood at 57.6x/44.4x FY24E/FY25E consolidated earnings per share (EPS), factoring in its focus on global expansion of product portfolio, which would translate into strong earnings growth, it said.
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UAW strike may slowdown revenue trajectory
Analysts at Kotak Institutional Equities, however, said that revenue gains could slow down. The brokerage firm retained its “reduce” rating on the counter, trimming revenue growth by 3-6 percent over FY24-26.
“We expect revenue growth trajectory to turn sluggish in the coming quarters, owing to decline in shipments to various OEMs due to United Auto Workers (UAW) strike and looming slowdown risk in developed countries due to elevated interest rates, which could potentially delay ramp-up of orders, especially in the EV segment,” Kotak analysts cautioned.
UAW is an American labour union which has been striking work against Detroit carmakers demanding higher salaries and more benefits. Ford and GM have reached tentative deals with them.
Kotak analysts said margins may not be sustainable over the medium term as incremental growth in the motor business can prove to be margin-dilutive due to pricing pressure from OEMs.
At 10.28 am, the stock was trading at Rs 527.95, up 2.96 percent from the previous close.
In the past six months, the stock has surged 16 percent s against a 5 percent rise in the Sensex. It hit a 52-week high of Rs 626 on August 23.
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