Sona BLW gains on acquisition of Serbian sensor design firm
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Analysts see a big growth opportunity in autonomous driving
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Share price of Sona BLW opened higher on January 10 on the acquisition of Serbian company Novelic, a sensor design and software applications firm. Analysts see the deal as a growth opportunity in autonomous driving, and expect an upside of 27-44 percent.
The deal helped improve sentiment around the stock which has corrected by nearly 43 percent over the last year. It closed at Rs 422 on Monday and opened 5 percent higher today.
On January 9, the Indian auto-component maker announced that it would buy 54 percent stake in Novelic for €40.5 million (around Rs 356 crore) to enter the advanced-driver assistance systems sensor market.
Novelic is a leading provider of mmWave radar sensors, perception solutions and full-stack embedded systems.
Brokerage Nomura, which has a ‘buy’ rating on Sona BLW and a target price of Rs 609, noted that the acquisition will add a new growth dimension for the auto-ancillary major. According to the analysts, it marks Sona’s entry into sensors and software segment.
They added that the Serbian company’s short-wave radar tech is best suited to solve autonomous needs and that the technology itself is less expensive than LIDAR (light detection and ranging) and is more accurate than a camera. Radar tech helps autonomous vehicles to get a sense of its surroundings and thus help in navigation.
In its field, Novelic is ahead of competition and with Euro New Car Assessment Programme (NCAP) safety requirements stricter, the buy can lead to significant growth, the analysts noted.
CLSA has upgraded the stock to ‘buy’ with a target price of Rs 535. The brokerage’s analysts too noted that the acquisition will open a new growth avenue in autonomous and connected vehicles. They added the ‘buy’ was completed at 26 times the 2022 profit and that it will be accretive to Sona BLW’s EPS from the very first year.
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