CLSA cuts Sona BLW target price after Blackstone exit, but remains bullish on growth

Foreign broking firm CLSA is unfazed by the exit of Sona BLW’s long-term investor Blackstone, and retained its buy rating on the stock. However, it has trimmed the target price from Rs 566 to Rs 529 per share.

A section of the market is worried over the continuity of management post-Blackstone exiting its 20.5 percent stake through a block deal. On March 13, the stock closed 6 percent lower at Rs 409.85 on the NSE after the block deal.

CLSA believes that Blackstone’s exit will not have a significant impact on Sona BLW’s future growth.

One reason for this confidence is the company’s strong order book, which continues to grow. Additionally, CLSA predicts that margins will increase, driven by the Production Linked Incentive (PLI) and a favorable product mix. It has forecast a robust 27 percent revenue CAGR (Compound Annual Growth Rate) over FY22-25, which is one of the strongest in the Indian auto components universe.

Also Read: Blackstone divests 20.5% stake in Sona BLW Precision for Rs 4,917 cr

Blackstone’s stake was picked up by Government of Singapore, Fidelity, FMR, ICICI Prudential Life Insurance and HDFC MF, according to an exchange filing. “We will always be a supporter and seek to collaborate and partner with the company going forward as we continue to evaluate investments in the energy transition theme,” Amit Dixit, Head of Blackstone Private Equity in Asia, said.

At 10:00 am on March 14, the stock was quoting at Rs 424.40 apiece on the NSE, higher by 4.48 percent from the previous close.

In Q3 FY23, Sona Comstar posted a revenue of Rs 685 crore with 39 percent year-on-year growth. Profit after tax came in at Rs 107 crore, logging a 45 percent on-year growth. The net order book increased to Rs 23,800 crore from Rs 20,500 crore as of September 30, 2022.

According to its website, the company supplies a variety of parts, including differential assemblies, gears, conventional and micro-hybrid starter motors, BSG systems, EV traction motors, and motor control units to original equipment manufacturers located in the US, Europe, India, and China.?

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