SONA Comstar shares: Railway division outlook, target prices for Sona BLW post Q2 results

Sona BLW Precision Forgings (Sona Comstar) reported a beat on revenue and Ebitda in the September quarter, led by railways and traction motor, as analysts believe potential business wins from struggling auto component suppliers in the EU will be a key upside for the stock going ahead.

ICICI Securities said Sona BLW Precision Forgings demonstrated resilience amidst challenging demand environment and its Q2 performance was above its estimates. Global supply-chain disruptions are driving new order enquiries for Sona Comstar, it said adding that the direct impact of US tariff remains limited in the near term, with only 3 per cent of its revenue is at risk. 

"Its EV business (32 per cent of revenue) growth is also expected to improve with rare earth magnet issue largely behind and reduced customer dependency. Healthy orderbook (Rs 23,600 crore) and consistent expansion in product portfolio are expected to support growth. We have increased Ebitda margin estimate by 60-80 basis points and EPS estimate by 2 per cent for FY26-28. Maintain Buy with DCF-based revised target of Rs 600 (earlier Rs 535)," it said.

Nomura said Sona Comstar's revenue was 6 per cent ahead of its estimates, while Ebitda margin at 25.3 per cent beat its projection of 23.7 per cent. 

It believes potential business wins from struggling auto component suppliers in the EU will be a key upside for Sona Comstar. Opportunity size in the near-term is 300 million euros, from which Sona Comstar can get 15-20 per cent share, Nomura anticipated. 

"Also, with order wins across multiple segments, further ramp-up in traction/ suspension motor, railway, etc will diversify the revenue mix further. With the largest EV customer’s share dropping to only 6 per cent in 2Q (23 per cent in FY22), further downside risks are limited. In the near-term chip shortages at Nexperia and fire at Novelis plant in the US could impact production for its customers, though," it said as it raised target to Rs 605 from Rs 506. 

MOFSL said it earlier valued the railway division separately. However, given that the company would not be disclosing segmental financials, it has now integrated the railway division’s financials into its estimates. 

"As a result, we have upgraded the earnings estimates by 27 per cent/20 per cent for FY26/FY27. However, this would also warrant a de-rating for the consolidated entity, in our view. Hence, we lower our target multiple for the consolidated entity to 34x from 36x earlier for the core. As a result, our target now stands at Rs 448 per share," MOFSL said.

JM Financial said the future growth in the railway division is expected from upcoming product launches like automatic plug door, HVAC systems, etc. Factoring in the lower margin profile of the railway division, the management has guided for an Ebitda margin range of 24-26 per cent. 

"We maintain Buy rating with March 2027 target of Rs 570 (35x FY27E EPS)," it said.