Buy Sona BLW Precision Forgings; target of Rs 611: LKP Research

LKP Research's research report on Sona BLW Precision Forgings

Sona Comstar reported revenue of ₹8,648 mn in Q4FY25, reflecting a YoY decline of 2.2%, primarily due to a model transition by a key customer which impacted supplies, particularly in the battery electric vehicle (BEV) segment. Revenue from the BEV segment grew 8% YoY to ₹2,944 mn, with its contribution to overall revenue increasing to 35% in Q4FY25 from 32% in Q4FY24. EBITDA margin stood at 26.7%, down ~119 bps YoY, largely due to an adverse product mix. However, PAT margin expanded ~248 bps YoY to 19.2%, with PAT at ₹1,663 mn, driven by a sharp rise in other income, which increased to ₹558 mn from ₹86 mn, driven by higher net interest income from surplus cash and QIP proceeds. For the full year FY25, the company posted revenue of ₹35,460 mn, up 11% YoY, with EBITDA at ₹9,667 mn. BEV revenue witnessed a robust 38% YoY growth and contributed 26% to the total revenue. EBITDA margin for FY25 stood at 27.3%, down 100 bps YoY, primarily due to an increased ESOP-related expense of ₹276 mn. Adjusted for ESOP costs, EBITDA grew 9% YoY, supported by lower input costs and favorable operating leverage, which helped offset the impact of the evolving product mix.

Outlook

We estimate Revenue/EBITDA/PAT to grow at a robust CAGR of 13.2%/13.1%/12.3% over FY25–FY27E. We value the company at 45x FY27E EPS of ₹12.7, arriving at a target price of ₹611, which includes ₹40 attributed to the recently acquired railway business.