Sona Comstar shares gain as Citi sees 34% upside potential on new product launches

Sona BLW Precision Forgings Limited (Sona Comstar) shares darted up 2 percent to Rs 578 at about 12:05 pm on August 21 after brokerage firm Citi suggests that the management’s focus on expanding margins, and new product launches bode well for the company in the coming quarters.

Citi, which has a buy rating on the company, has assigned a target price of Rs 680, an upside of 21 percent from the closing price of August 18. Since the start of the year, Sona has given a return of 38 percent.

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The broking firm has also said that a favourable product mix and market share gains should continue to drive up revenue and profit at a faster pace. Furthermore, analysts at the firm added that the company’s management focus is eyeing returns, growth and an expansion in margins in the upcoming quarters.

The auto-component maker reported a 47.8 percent year-on-year (YoY) jump in net profit at Rs 112 crore for the first quarter that ended June 30, 2023.

In the quarter, the total revenue from operations stood at Rs 731.3 crore during the period under review, up 25.2 percent against Rs 584.2 crore in the corresponding period of the preceding fiscal.

Furthermore, Sona’s board of directors approved an investment of Rs 99.7 crore for the capacity expansion of its Chennai plant from 4 lakh to 6 lakh electric vehicle traction motors. It also decided to add a new capacity of 5 lakh units of printed circuit board assembly by 2024-2025.

“We have continued to progress on all our key strategic priorities. With four new BEV (Battery Electric Vehicle) program wins, our net order book grew to Rs 22,000 crore, of which EVs contributed 78 per cent,” Sona Comstar Managing Director Vivek Vikram Singh said.

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