SYNOPSIS: BofA upgraded this India-based automotive technology company to “buy”, indicating a 32 percent upside, citing growth from EV traction motors, driveline recovery and railways segment expansion, while expecting strong revenue and earnings growth through FY28.
During Monday’s trading session, shares of an India-based automotive technology company and one of the world’s leading mobility technology companies recovered nearly 4 percent on BSE from its day’s low.
The global brokerage BofA (Bank of America Corporation) upgraded its rating to “buy” and raised its target price, indicating a potential upside of around 32 percent. It expects the company’s revenue to grow at about 20 percent CAGR and EPS at 23 percent CAGR between FY26 and FY28, supported by growth in its traction motors, driveline, and railways businesses.
We’re talking about Sona BLW Precision Forgings Limited, which is primarily involved in the manufacturing of precision forged bevel gears and differential case assemblies, conventional and micro-hybrid starter motors, EV traction motors, etc., for automotive and other applications.
With a market cap of Rs. 30,390 crores, shares of Sona BLW Precision Forgings Limited closed in the green at Rs. 488.7, up by around 1 percent, as against its previous closing price of Rs. 486.1 on BSE. The stock has delivered positive returns of around 1 percent in one year, but has fallen by nearly 7 percent in the last one month.
Brokerage Target & Outlook
Global brokerage firm BofA Securities has upgraded Sona BLW Precision Forgings Limited to a “buy” rating and raised its target price from Rs. 600 to Rs. 640 per share, implying an upside potential of 32 percent from its previous closing price of Rs. 486.1 on BSE. In its note, the brokerage highlighted that the company appears to be returning to a growth path after navigating a challenging phase over the past few years. BofA believes the company’s growth outlook is supported by the following three key business drivers:
- I. The brokerage expects strong momentum in traction motors for electric two-wheelers and three-wheelers, with the segment likely to double over the next two years as EV adoption continues to accelerate.
- II. The company’s driveline business is showing signs of recovery after facing nearly two years of slow growth due to issues linked to certain customers. According to BofA, the turnaround is being supported by improving demand in the domestic market, higher product content per vehicle, and increased market share in differential gears. The brokerage also expects some major customer orders to materialise by FY28, which could further support growth.
- III. BofA sees the railways segment as a potentially important growth opportunity for the company, even though it is not fully reflected in current valuations. The brokerage noted that ongoing capex by Indian Railways, combined with Sona BLW’s product portfolio expansion, could support strong growth in this segment.
In the railways segment, the brokerage expects the business to grow at around 18-20 percent revenue CAGR over the medium term, supported by the government’s continued investments in railway modernisation, faster train networks, and infrastructure upgrades. The segment is also expected to maintain healthy margins and returns, given the specialised nature of braking systems supplied to Indian Railways and the limited number of qualified suppliers. BofA also noted that many competitors in this segment are international companies, highlighting the strong positioning of Sona BLW in the market.
Reflecting these three growth drivers, BofA has revised its earnings estimates upward, increasing its earnings per share (EPS) projections by about 2-7 percent. The brokerage expects revenue to grow at a CAGR of around 20 percent between FY26 and FY28, while EPS is projected to expand at roughly 23 percent CAGR during the same period.
The brokerage also pointed out that valuations now appear more reasonable after the stock’s recent underperformance. Sona BLW currently trades at around 37 times FY27 earnings and 31 times FY28 earnings, compared with its historical valuation range of 45-50 times, bringing it more in line with peers. In addition, BofA sees potential upside from further market share gains in differential gears, opportunities arising from supply disruptions among European competitors, and emerging areas such as humanoids and sensors.
Financials & Key Ratios
For Q3 FY26, Sona BLW posted a consolidated revenue from operations of Rs. 1,200 crores, reflecting a sequential growth of over 5 percent QoQ compared to Rs. 1,138 crores in Q2 FY26. Likewise, on a year-on-year basis, revenue increased by nearly 38 percent from Rs. 868 crores recorded in Q3 FY25.
Meanwhile, net profit for Q3 FY26 stood at Rs. 150 crore, indicating a decrease of around 12 percent QoQ from Rs. 170 crores in Q2 FY26, as well as a marginal year-on-year fall by around 1 percent from Rs. 151 crores reported in Q3 FY25.
In terms of financial ratios, Sona BLW has a RoE of 14.4 percent, ROCE of 17.8 percent, and a debt-to-equity ratio of 0.04. Further, the stock is currently trading at a higher P/E of 49.5, compared to the industry average of 26.5, indicating the stock might be overvalued.
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