Shares of Sona BLW Precision Forgings Ltd. surged as much as 4% on Wednesday, March 11, following a significant upgrade from brokerage firm BoFA Securities. According to reports from CNBC TV18, the stock was trading at ₹532.3 during the session, approaching its recent 52-week high of ₹559.5. Along with the upgrade to 'buy', BoFA Securities has raised its price target on the auto components manufacturer to ₹640 from ₹600 earlier, implying an upside potential of 25% from Tuesday's closing levels.
As reported by CNBC TV18, BoFA Securities noted that Sona BLW's business has returned to the growth trajectory after a 'pretty tough period'. The brokerage identified three key growth engines for the company going forward. The first growth driver is the traction motors business for electric two-wheelers and three-wheelers, which is set to double in the next two years. The second driver is the Driveline business, which has begun to grow after two years of no growth. The third potential growth driver is the company's railways business, which could turn out to be an unprecedented growth driver with many entry barriers.
According to CNBC TV18, BoFA Securities has raised its Earnings Per Share (EPS) estimates for Sona BLW by 2% to 7% following these growth drivers. The brokerage expects Sona BLW's revenue to grow at a Compounded Annual Growth Rate (CAGR) of 20% over financial year 2026-2028, while its Earnings per Share (EPS) can grow at a 23% CAGR over the same timeframe. As reported by CNBC TV18, 19 analysts have coverage on Sona BLW of which 15 have a 'buy' rating, three say 'hold' and the other one has a 'sell' recommendation. The consensus estimates of price targets imply an upside potential of 7% from current levels for the stock.
According to The Economic Times, BoFA Securities projects the railways business will account for 25% of revenues by fiscal 2028, up from around 20% currently. The segment has potential to deliver 18-20% revenue CAGR over the medium term, supported by government capital expenditure on modernization and faster trains, along with ongoing portfolio expansion. The margin and return profile of the railways business is "quite solid," underpinned by the critical nature of products supplied, braking systems, entry barriers including long track record and tender process requirements, and concentrated, disciplined competition. BoFA noted that Sona's peers in this segment, largely foreign players Wabtec and Knorr Bremse, generate 28-30% EBITDA margins and 40-60% return on capital employed. Under Sona's ownership, the business will benefit from sharper focus, cost and process efficiencies, and faster new product commercialization.
As reported by The Economic Times, BoFA Securities believes Sona's valuations at 37x F27 / 31x F28 PE look reasonable after almost two years of underperformance, compared to past 45-50x levels. The brokerage sees optionality on top of current valuations from differential gear share gains on European Union supplier distress, humanoids, and sensors. The new price target of ₹640 is based on 35x PE plus ₹50 per share for the EU opportunity, with the valuation methodology unchanged from the previous target. BoFA's upgrade signals a turning point for Sona Comstar after a prolonged period of subdued performance, with the brokerage's "risk reward favorable" assessment pointing to a more optimistic outlook ahead.
