Sona BLW Precision Forgings’ (Sona Comstar) stock surged by 10% to Rs 707 in early trading on October 24, following the announcement of robust Q2 results and a strategic acquisition agreement with Escorts Kubota. The auto components manufacturer reported a 16% year-on-year increase in consolidated profit after tax (PAT), reaching Rs 143.57 crore for the quarter ending September 30, 2024. Revenue from operations also grew by 17%, amounting to Rs 922.18 crore, compared to Rs 787.46 crore in Q2 FY23. A significant contributor to this growth was the battery electric vehicle (BEV) segment, which accounted for 36% of revenue and witnessed a 53% year-on-year increase during the quarter.
The company also disclosed a strong net order book of Rs 23,100 crore as of the end of September 2024. To further bolster its growth prospects, Sona BLW signed an agreement to acquire the Railway Equipment Division (RED) of Escorts Kubota for Rs 1,600 crore. The transaction, structured as a slump sale, positions RED as a going concern. This acquisition marks Sona Comstar’s strategic diversification into the railway components sector, with RED being a prominent supplier of key components such as brakes and suspension systems for various types of rolling stock. The division reported revenue of around Rs 950 crore in FY24.
Market analysts have mixed views on the company after these developments. While JPMorgan has maintained the neutral rating against the target price of Rs 640 per share, as growth driven by revenues from electric vehicles is still underway, CLSA has upgraded Sona BLW to ‘outperform’ by increasing the target price from Rs 690 to Rs 712, showing the possibility of profitable growth via the recent acquisition.
Although Sona BLW’s core business is likely to decelerate over time, the railway equipment division will likely contribute to revenues from FY26 onwards and offer new levers for growth.
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Source: Moneycontrol
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