Sona BLW shares: Jefferies initiates coverage with ‘Buy’ rating after Blackstone stake sale

“A large order book provides growth visibility; we expect 31%/40% revenue/EPS CAGR over FY23-26E with ~45% of revenues from BEVs by FY26E. Valuations appear rich at 38x FY24E PE, but should sustain, given the strong outlook. Any PLI benefits pose upside risk to our estimates,” said the brokerage while initiating coverage on Sona BLW shares with a Buy tag and a target price of ₹575 apiece.

“We expect Sona’s revenues, EBITDA and EPS to clock 31%, 35% and 40% CAGR over FY23-26E, with upside risk to our estimates if PLI benefits accrue. Our FY24-25E EPS is broadly in-line with street. Its 38x/28x FY24E/FY25E PE appears rich, but we believe premium valuations will sustain, given strong long-term growth outlook. Stock is down 51% from December 2021 peak, underperforming Nifty 50 by 52% – a key overhang of stake sale by Blackstone is behind,” the note stated. Though, key downside risks, as per Jefferies, could be global auto industry downturn and slow ramp-up of new orders.

Private equity firm Blackstone on Monday sold its 20.50% stake in auto component maker Sona BLW Precision Forgings for ₹4,917 crore through an open market transaction. Blackstone, through its affiliate Singapore VII Topco III Pte Ltd offloaded the shares in Sona BLW. Singapore VII Topco III Pte is a promoter entity in Sona BLW.

Monetary Authority of Singapore, Government of Singapore, BNP Paribas Arbitrage, Fidelity Asian Values Plc, Societe Generale, among others were the buyers of the shares, as per the block deals data on the exchanges.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.