Nomura Upgrades Sona BLW Target Price by 15% Due to Strong Q1 Results and Robust Order Book

Global brokerage firm Nomura has raised the target price for Sona BLW Precision Forgings by nearly 15%, following impressive quarterly results and a strong order book. Nomura maintained its ‘buy’ recommendation, increasing the target price from ₹687 to ₹788, indicating a 16% potential upside.

Nomura highlighted Sona BLW’s expanding order book and new product developments, which are expected to drive growth beyond industry averages in the medium term. The brokerage now values the company at 45 times the average FY26-FY27 earnings per share (EPS), placing it in the middle of the expected trading range of 40-50 times. Currently, the stock trades at around 43.7 times FY26 EPS, which Nomura finds attractive given its estimated 29% EPS compound annual growth rate (CAGR) for FY24-FY27, supporting its premium valuation.

Nomura predicts a 21% year-on-year revenue growth in FY27, with potential for even higher growth from strong order wins in Equipmake motors and Novelic. However, near-term challenges from a slowdown among key customers led Nomura to revise its revenue growth estimates to 21% and 37% year-on-year for FY25 and FY26, down from the previous 25% and 40%.

Despite lowering FY25/26 revenue estimates by about 2% and 5%, Nomura maintains EBITDA margins at 28.5% and 29.6%, resulting in a +1% and -6% change in EPS.

Stock Performance

Over the past year, Sona BLW’s stock rose 22% and 6% year-to-date in 2024, with positive returns in four out of seven months. It increased by 6.5% in July after a 1.5% dip in June. The stock hit its 52-week high of ₹764.75 on July 15, 2024, and is currently 11% below that peak. It has risen over 39% from its 52-week low of ₹489 on October 25, 2024.

Q1 Earnings

For Q1 FY25, Sona BLW reported a 24% year-on-year increase in profit after tax (PAT) to ₹140 crore, with revenue up 22% to ₹890 crore, surpassing expectations. The EBITDA margin stood at 29%, with EBITDA rising 28% to ₹260 crore year-on-year.

Electric vehicle (EV) revenue made up 33% of total revenue, showing Sona BLW’s focus on the EV segment. The company’s order book grew to ₹23,300 crore in Q1 FY25, up from ₹22,600 crore in Q4 FY24, with 79% of new orders coming from battery electric vehicles (BEVs).

Sona BLW secured ₹1,100 crore in new orders during the quarter, including ₹680 crore from an existing EV-NA CV customer and ₹150 crore from a new Asian EV customer. The board approved raising ₹2,400 crore through equity or convertible instruments to capitalize on new opportunities and technological partnerships.

CEO Vivek Vikram Singh highlighted progress on strategic priorities, including a new in-cabin sensing product, ACAM, and advancements in technology and product development.

These achievements position Sona BLW for continued growth and innovation in the automotive and EV sectors.