Despite the bearish trend in the overall market, Sona BLW Precision Forgings, an automotive technology company, witnessed a strong spike in its shares on Thursday after the company posted the highest-ever revenue, EBITDA, and net profit for the September quarter.
The company on Wednesday posted a 34% YoY and 15.7% QoQ growth in its consolidated net profit at ₹124 crore, while the revenue from operations came in at ₹791 crore, an increase of 20% YoY, and it reported an EBITDA of ₹223 crore for Q2 FY24, an improvement of 35% YoY and 28.2% QoQ.
Following the robust Q2FY24 performance, the stock began Thursday's trade positively, opening at ₹520 apiece, 1.41% higher than the previous closing price of ₹512.75, and zoomed further during the trade to hit an intraday high of ₹539.95 apiece, up by 5.30%. At 12:15 p.m., the stock was trading with a gain of 4.80% at ₹538.
During the quarter, the company said, it received an order from an Indian OEM of PVs, CVs, OHVs, and EVs to supply mid-drive traction motors for their upcoming electric three-wheelers. This program has added ₹370 crore to the company's order book.
Sona BLW Precision is a mid-cap stock with a market capitalisation of ₹31,150 crore. The company is engaged in designing, manufacturing, and supplying engineered automotive systems and components, such as differential assemblies, gears, conventional and micro-hybrid motors, BSG systems, and EV traction motors, across all vehicle categories.
This year, the company's shares have gained 28%, rising from ₹420 apiece to the current trading price of ₹538. This performance stands in stark contrast to last year when the shares lost 43.56% of their value.
Remarkably, at present levels, the stock is trading 82% higher compared to its listing price of ₹291 apiece.
Domestic brokerage firm Kotak Institutional Equities retained its 'reduce' rating on the stock post Q2 performance. The brokerage trimmed the company's EPS estimates by 1-4% over FY2024–26E on lower revenue growth assumptions.
The brokerage lowered its revenue growth assumptions by 3-6% over FY2024–26E, citing a decrease in shipments to various OEMs resulting from the UAW strike and the potential slowdown risk in developed regions due to higher interest rates and increasing geopolitical tensions. These factors could potentially delay the ramp-up of orders, especially in the EV segment, it said.
However, it noted that medium-term growth prospects remain strong, led by a robust order book, especially in the differential assembly and traction motor segments, a higher mix of the BEV segment, and an increase in content per vehicle, led by newer product launches and foraying into new segments, which the brokerage believes are priced in the company's stock price.
"In our view, current margins are not sustainable over the medium term, as we expect incremental growth to be driven by the motor business, which is margin-dilutive, besides pricing pressure from OEMs," the brokerage added.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.
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