Sona BLW's diversified growth drivers impress brokerages; Nomura ups target

Brokerages have turned positive on Sona BLW Precision Forgings Ltd. (Sona Comstar) following a stronger-than-expected second quarter, citing robust traction from the company’s railway and traction motor businesses even as electric vehicle (EV) revenues moderated.

 

Analysts believe the company’s expanding order book, deepening product diversification, and potential to gain market share in Europe position it well for steady earnings growth despite near-term softness in the EV segment.

 

Sona BLW’s consolidated revenue in the July-September quarter rose 24 per cent year-on-year to ₹1,140 crore, ahead of Street expectations. Ebitda grew 13 per cent to ₹290 crore, with margins at 25.3 per cent, surpassing estimates of around 23.7 per cent. Adjusted net profit rose 10 per cent to ₹170 crore.

 

 

The beat was led by a stronger performance in the traction motor and railway segments, offsetting a 17 per cent year-on-year (Y-o-Y) decline in EV revenue. The company said EV sales were impacted by weakness in a single model, though the segment still contributed 32 per cent to total revenue compared with 25 per cent in the preceding quarter.

 

Order book expansion, EU opportunity in focus

 

Brokerages highlighted the company’s healthy order inflow during the quarter. Sona BLW secured fresh orders worth ₹1,000 crore, taking its order book to a robust ₹23,600 crore, even after adjusting for project delays and programme changes. These include a ₹1,300 crore railway project to be executed within a year and multiple new EV-related programs for Asian and European automakers.

 

Nomura said Sona’s ability to add orders across segments despite a weak EV backdrop reflects its growing engineering depth. “Potential business wins from struggling auto component suppliers in the EU will be a key upside for Sona,” the brokerage noted, pointing out that three direct competitors in Europe have filed for insolvency. Nomura estimates the immediate opportunity size at around €300 million, from which Sona could capture 15–20 per cent.

 

The brokerage raised its target price sharply to ₹605 from ₹506, valuing the stock at 42x FY28 earnings. It expects the company’s Ebitda margins to remain in the 24-26 per cent range and forecasts over 15 per cent annualised earnings per share (EPS) growth beyond FY27.

 

Margins steady despite EV slowdown

 

JM Financial also underscored Sona’s margin resilience, maintaining a ‘Buy’ rating with a target price of ₹570. The brokerage said margin expansion of 150 basis points (bps) sequentially was aided by positive operating leverage and cost control.

 

It highlighted new business wins worth over ₹1,000 crore during the quarter, including a driveline supply programme for a North American recreational vehicle maker and nominations worth ₹820 crore from ClearMotion for suspension motors.

 

The company’s railway division, which was integrated earlier this year, is expected to add to future growth with new offerings such as automatic plug doors and HVAC systems. JM Financial expects Sona to sustain margins in the 24-26 per cent band, even with the lower-margin railway business scaling up.

 

Mixed views on valuation after railway integration

 

Motilal Oswal, however, turned more cautious following the integration of the railway business into consolidated accounts. It maintained a ‘Neutral'stance with a target price of ₹448, valuing the stock at 34x September 2027 earnings.

 

While the brokerage upgraded its FY26 and FY27 earnings estimates by 27 per cent and 20 per cent, respectively, it said the inclusion of a lower-margin business warrants a valuation de-rating. “We earlier valued the railway division separately; now, with consolidated disclosures, we have adjusted the multiple accordingly,” it said.

 

Nuvama Institutional Equities maintained its ‘Buy’ rating but trimmed the target price to ₹550 from ₹560, citing a marginal cut to FY26–27 Ebitda estimates following a postponement of its China joint venture. It expects revenue and Ebitda to grow at 17 per cent and 14 per cent CAGR, respectively, between FY25 and FY28, supported by the large order book and railway diversification.

 

Diversification offsets EV volatility

 

Analysts broadly agree that Sona BLW’s business mix has evolved beyond its EV-heavy profile, with increasing traction from conventional driveline, traction motor and railway businesses providing balance to earnings.

 

Despite near-term headwinds in the EV market, the company’s consistent order wins, expanding product range, and emerging opportunities in Europe are seen as critical growth drivers.

 

Analysts believe Sona BLW’s broadening business mix, steady margins, and exposure to new opportunities in railways and Europe position it well for the next phase of growth.