The shares of the automotive component manufacturer gained up to 11 percent after the company set to enter the railways component sector by acquiring Escorts Kubota Ltd’s railway equipment division.
With a market capitalization of Rs 43,733.25 crore, the shares of Sona BLW Precision Forgings Ltd were trading at Rs 706.80 per share, increasing around 10.02 percent as compared to the previous closing price of Rs 642.45 apiece.
Reason for rise:-
The shares of the company have seen positive movement after Sona BLW Precision Forgings Ltd inked an agreement with Escorts Kubota Ltd to acquire the railway equipment division of EKL, for an enterprise value of Rs 1,600 crore.
Furthermore, RED is a major provider of important railway components, including as brakes and suspension systems for diverse rolling stocks. In FY24, RED reported revenue of around Rs 950 crore and an estimated EBIT of Rs 179 crore. The planned purchase of RED is projected to be profits accretive for Sona Comstar in the first year and provide considerable growth potential.
Financial conditions:-
Looking into the company’s financial condition, revenue jumped by 17 percent from Rs 787 crore in Q2FY24 to Rs 922 crore in Q2FY25, however during the same period of time, net profit magnified drastically by 16 percent from Rs 124 crore to Rs 144 crore.
The company’s EBITDA rose by 23%, driven by a 53% year-on-year growth in BEV revenue, which now accounts for 33% of total revenue. Improved margins from operating leverage further amplified growth, resulting in higher profit growth compared to revenue growth.
Technology Roadmap:-
The company commercialized two new products: park gear for electric commercial vehicles and an in-cabin child presence sensor. Additionally, it added two products to its roadmap, including an integrated motor controller and high-voltage systems, focusing on innovation to strengthen its EV market position.
Order Book:-
The company’s net order book expanded to ₹233 billion, with 79% derived from EV programs. The ongoing shift toward electrification reduced the revenue share from ICE-dependent programs to single digits, highlighting the company’s strategic move away from internal combustion engine reliance.
Future Growth and Acquisitions:-
The company approved a fundraising of up to ₹2,400 crores to support potential acquisitions and strategic opportunities in mobility technology. With a focus on mobility-related acquisitions, it anticipates significant growth for NOVELIC, aiming to establish it as a leading global sensing company.
Industry Insights:-
The company remains optimistic about future growth despite market challenges, focusing on technology development, product innovation, and customer diversification. Its strategic priorities include electrification, new product development, and expanding its customer base to seize emerging opportunities in the EV market for increased profitability.
Company Overview:-
Sona BLW Precision Forgings Limited is an India-based firm that manufactures precision-forged bevel gears and differential case components for automotive and other applications. The company manufactures differential assemblies, differential gears, and other products.
Written by:- Abhishek Singh
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