Buy Sona BLW Precision Forgings; target of Rs 678: LKP Research

LKP Research is bullish on Sona BLW Precision Forgings has recommended buy rating on the stock with a target price of Rs 678 in its research report dated May 03, 2024.

Broker Research

May 03, 2024 / 14:29 IST

Buy

26 Aug, 2025 12:21

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LKP Research's research report on Sona BLW Precision Forgings

Sona BLW Precision Forgings Ltd (Sona) posted a decent set of numbers in Q4 led by new order book execution. Revenues grew by 19.1% yoy and 13% qoq. The growth came on the back of good growth due to scale-up of revenues from new programs. During the full year, Differentials business grew by 22%, while starter motors grew by 13.3%. Management indicated that light vehicle market (across geographies) remained healthy. However, OHV demand in India and US was weak and is expected to be a drag on the performance in the near term. EV revenue grew 23% qoq and the share of EV revenue stood healthy at 32% during Q4 as the company continues to win new EV orders (79% of net order book). EBITDA margin stood at 27.9% (+100bps yoy, -180bps qoq). Higher freight rates (owing to Red Sea crisis) had an impact of 40bps on margin (exc. which the margins came in at 28.3%). The yoy improvement in margin was led by favourable product mix and higher operating leverage. EBITDA came-in at ₹2.47bn (+23% yoy, +6% qoq). PAT stood at ₹1.48 bn (+20%yoy,+11%qoq). Sona’s order book stood at healthy ₹226 bn at the end of FY 24.

Outlook

In order to factor in our slight concerns over the Indian and US CV (14% of topline) and OHV (10% of topline) segments in line with a tepid view of the management, we prune down our target from ₹708 to ₹678 by slightly lowering our estimates. However, we maintain BUY rating on Sona with the stock valued at 45x FY26E earnings which is rich, but we believe premium valuations will sustain, given strong long-term growth outlook. Key risks are slower EV adoption and inability to win new customers. Accrual of PLI benefits remains the upside risk.

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