Buy Sona BLW Precision Forgings; target of Rs 598: ICICI Securities

ICICI Securities research report on Sona BLW Precision Forgings

Sona BLW’s (SONA) Q2FY24 revenue, margin and earnings came in line with our estimates with EBITDAM coming in at 28.2%. BEV revenue was 12% higher QoQ at INR 2.1bn (27% mix), with BEVs contributing 78% of the unexecuted orderbook. In Q2FY24, it won two new EV programmes from i) a North American OEM (new customer) for rotor-embedded differential sub-assemblies and ii) an existing India customer for traction motors for e3Ws.

Outlook

Post ~14% correction in the stock price over the last 3 months, we upgrade SONA to BUY from Add with a revised DCF-based TP of INR 598 (earlier: INR 630), implying ~44x FY25E EPS vs 42% earnings CAGR in FY23-25E. The change in TP is due to ~5% cut in revenue for FY24E/FY25E each to factor in lower e2W volumes (9-10% of SONA’s revenue) led by FAME subsidy reduction.