Sola BLW shares jump 5% as BofA ups target; 3 growth drivers for Sona Comstar

Shares of Sona BLW Precision Forgings Ltd (Sona Comstar) climbed 5 per cent in Wednesday’s trade after BofA Securities upgraded the stock to 'Buy' from 'Neutral' and raised its target price to Rs 640 from Rs 600, implying a 24 per cent upside from the prevailing levels. The foreign brokerage said that after a tough FY26, the company’s business is expected to return to a stronger growth phase.

By 11 am, Sona Comstar shares had climbed 4.81 per cent to hit a high of Rs 536.70 on BSE.

BofA Securities expects Sona Comstar to deliver revenue growth of 20 per cent and earnings per share growth of 23 per cent on a compounded annual basis over the next two years, driven by three key growth engines.

First, the traction motors business is expected to double over the next two years. Second, the driveline business has returned to growth after two years of stagnation caused by specific customer-related drag. The brokerage said the recovery is being led by an improvement in the India cycle, higher content value and market share gains in differential gears. It added that FY28 could see the conversion of select marquee orders.

Third, BofA said the railways business remains an underappreciated growth driver. “Steady capex growth at Indian Railways along with portfolio expansion will underpin strong growth in this biz,” the brokerage said. It added that it raised its earnings per share estimates by 2-7 per cent, ahead of Street expectations, which resulted in the increase in the target price.

“After almost two years of underperformance, valuations for Sona now at 37 times FY27 and 31 times FY28 PE look reasonable compared with the past range of 45-50 times and are in line with the peer set. Moreover, we see optionality on top of this from differential gear share gains on EU supplier distress, humanoids and sensors,” BofA Securities said.

On the railways business, the brokerage said the segment has the potential to deliver 18-20 per cent revenue compound annual growth over the medium term, supported by government capex on modernisation, faster train speeds and ongoing portfolio expansion. It said the segment’s margin and return profile remains strong due to the critical nature of the braking systems supplied, high entry barriers stemming from long track records, tender processes and customer trust at Indian Railways, as well as disciplined competition. BofA noted that most of Sona’s peers in the railways segment are foreign players.