Brokerage JM Financial has reiterated its ‘Buy’ rating on auto ancillary firm Sona BLW Precision Forgings (Sona Comstar), citing the company’s healthy quarterly performance and attractive valuations.
The brokerage has pegged a March 2027 target price of Rs 570, implying an upside potential of 16.5 per cent from the current levels.
Sona BLW reported a 23.6 per cent year-on-year rise in consolidated revenue for the second quarter of FY26 to Rs 1,140 crore, exceeding JM Financial’s estimates by 6.7 per cent. The robust growth was largely driven by the consolidation of revenue from the company’s newly acquired railway division.
The company’s EBITDA margin stood at 25.3 per cent, surpassing the brokerage’s forecast by 150 basis points, aided by “positive operating leverage.”
The solid show came despite headwinds in the electric vehicle (EV) business, where revenue declined 17 per cent year-on-year. JM Financial attributed the weakness to a “demand slowdown at a key customer” and continuing “rare-earth magnet supply constraints.”
To mitigate this challenge, Sona BLW has developed a “rare-earth-free Ferrite Assisted Synchronous Reluctance Motor (FeSynRM Motor),” which, though heavier, offers a “lower cost.”
JM Financial’s bullish view stems from the company’s strong demand visibility. The brokerage noted that “three direct competitors… from the EU have filed for insolvency proceedings,” triggering an “increase in enquiries from the region.” Sona BLW is “hopeful of securing new orders” as a result.
The company’s order book continues to expand, backed by several recent wins. It bagged its first program from its Mexico plant, an Rs 2.6 billion order to supply a “North American recreational vehicle OEM.”
Additionally, it received new nominations from ClearMotion worth Rs 8.2 billion for suspension motors. Factoring in the lower-margin profile of the railway division, the management has guided for a 24-26 per cent consolidated EBITDA margin.
JM Financial’s target price is based on a valuation of 35x FY27E EPS, reflecting confidence in Sona BLW’s growth trajectory and its ability to capitalize on emerging global opportunities.