Sona Comstar: Jefferies highlights company's shift towards higher-value engineering; stock reacts

Sona BLW Precision Forgings Ltd is drawing attention after Jefferies highlighted the company's evolution from a traditional manufacturer towards higher-value engineering, design and technology-led businesses, with opportunities across electric vehicles, railways, robotics and physical AI.

The brokerage's latest report, titled "India Forum 2026: Manufacturing Beyond 'Make in India'", is based on comments from Vivek Vikram Singh, MD & Group CEO of Sona Comstar, at the Jefferies India Forum. The report said India's next phase of manufacturing growth will require a shift from contract manufacturing towards design, innovation and technology leadership.

Sona BLW Precision Forgings shares fell 2.13% on Monday, touching a low of Rs 807.40, compared with the previous close of Rs 825.

Jefferies said Sona Comstar has already demonstrated this transition, delivering more than 10-fold revenue growth between FY15 and FY25. The company achieved this through three strategic priorities  electrification, expansion in Western markets and the addition of new product verticals.

The company now aims to replicate a similar 10-fold growth over the next decade through higher-technology offerings across EVs, railways, robotics and physical AI. Its EV strategy also includes a partnership with Denso, which Jefferies identified as one of the factors supporting the company's expanding growth potential.

The report said India's large engineering talent pool could provide an advantage as manufacturers move towards higher-value activities. India produces around 2.6 million STEM graduates annually, with high-calibre engineering talent costing roughly one-fifth of Western equivalents, according to the report.

Jefferies also highlighted government initiatives including the Production Linked Incentive (PLI) scheme, the India Semiconductor Mission (ISM), Electronics Components Manufacturing Scheme (ECMS), Rare Earth Permanent Magnets (REPM) initiative and Research, Development and Innovation (RDI) scheme as measures supporting industrialisation.

However, the report flagged India's relatively low research and development spending as a bottleneck. R&D spending stands at around 0.8% of GDP, compared with about 2.6% in China and 3.4% in the US, while the private sector accounts for around 45% of India's R&D spending.

For Sona Comstar, Jefferies' price target is based on 55 times FY28E EPS, above the company's 44 times average multiple since its 2021 listing. The brokerage cited Sona's engineering capabilities, Denso partnership and entry into robotics and physical AI as factors supporting the premium valuation, while identifying lower-than-expected exports and slower new-order wins as key downside risks.