The shares of Sona BLW Precision Forgings surged 8.37% on Tuesday’s early trades to reach an intraday high of ₹ 457.85 apiece on the National Stock Exchange (NSE). It is a mid-cap company with a market capitalization of ₹ 24,714 crores.
The company announced the acquisition of a 54% stake and voting rights in Novelic, for a consideration of 40.5 million Euros (₹ 355 crores). The transaction will be done in three tranches within two years from the completion of the deal. The company will fund the transaction primarily from its existing resources.
Sona BLW Precision Forgings (Sona Comstar) is an Indian automotive technology company engaged in the designing, manufacturing and supplying of engineered automotive systems and components across all vehicle categories. It develops mechanical and electrical hardware systems as well as base and application software solutions.
Novelic is a Serbia-based company founded in 2012. It provides mmWave radar sensors, perception solutions and full-stack embedded systems. Its ADAS (Advanced Driver Assistance Systems) sensors are a fast-growing category in the automotive industry, with a potential market size of $ 43 billion (₹ 354,621 crores) in 2030.
Novelic reported revenue of 9.3 million euros (₹ 81 crores) and a net profit of 2.5 million euros (₹ 22 crores) respectively. In fact, it has been profitable every year since its inception.
Sonal BLW will also acquire the entities owned by Novelic’s founders. These entities are engaged in chip designing. Novelis’ acquisition marks Sona BLW’s foray into the field of autonomous and connected vehicle technologies.
This acquisition is expected to provide strong growth opportunities to Sona BLW and be EPS accretive from the first year. In other words, it will increase Sona BLW’s earnings per share (EPS) and be favourable for the company’s market price.
Targets
CLSA
Global Brokerage CLSA has a buy rating on the shares of Sona BLW with a target price of ₹ 535.00. Its shares were trading at ₹ 454.35 apiece at 11:39 AM on Tuesday and the given target translates to an upside of 17.75%. CLSA said that the acquisition shall open a new vertical as Sona Novelic’s financials are impressive.
“The acquisition will be accretive to EPS from its first year. The global investment bank expects 28% CAGR for earnings over FY22-25,” the brokerage added.
Citi
Citi has maintained a buy call on the shares of Sona BLW, with a target price of ₹ 560, citing comfortable valuations. This indicates an upside of 23.25% as compared to its share price.
It, however, said that the company’s target to reach $100 million in revenue over the next 6-7 years will be an uphill task from the current levels of $9.3 million.
Written by Simran Bafna
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