Neutral SONA BLW Precision Forging; target of Rs 490: Motilal Oswal

Motilal Oswal's research report on SONA BLW Precision Forging

SONA BLW (SONACOMS)’s adjusted EBITDA margin came in below our estimates in 4QFY25 due to a model changeover at one of its key OEMs as well as an adverse mix. Adjusted PAT exceeded our estimates because of higher-than-expected other income from surplus funds. The company continues to win new orders, especially in its core division, resulting in its ever-increasing order backlog at INR242b (6.8x revenue in FY25). The share of EVs was higher in the order book/revenue at ~76%/36% as of FY25. SONACOMS is now seeing the impact of a slowdown in the EV transition, with 4Q revenue/EBITDA declining 4%/1% YoY. The ongoing global tariff war, weak global macro, and expected supply chain disruption, especially in EVs, remain key headwinds in the near term, which would restrict growth.

Outlook

Given these factors, valuations at ~49x FY26E/44x FY27E consol. EPS appears expensive. Reiterate Neutral with a TP of INR490, premised on ~40x FY27E consol. EPS and assigning INR49/share for the recently acquired railway business.