The auto component space is in focus- Nuvama Institutional Equities has reaffirmed a Buy call on Sona BLW Precision Forgings. The brokerage has raised its 12-month target to Rs 570, which implies an upside of close to 16% from current levels. The note leans on the company’s deep EV exposure, a swelling railway business and a multi-year visibility anchored by a large order book as key catalysts for the upside call.
Nuvama on Sona BLW: Valuation, target
In its latest update, Nuvama kept its Buy rating and increased the target marginally after revising earnings estimates for FY27 and FY28. The brokerage applies a 45 times valuation multiple to the core business and 25 times to the railway arm, arriving at the Rs 570 target. The assumptions hinge on earnings growth that continues despite uneven global EV demand. The note describes the order book as a major support for that view.
Sona has an Rs 23,600 crore, order book. Roughly 70% of this comes from EV programmes spanning 62 platforms and 32 customers. Some are mature, some are still scaling, and others have not yet entered mass production. For Nuvama, that laddered rollout provides the steady volume base necessary to justify a premium valuation.
Nuvama’s view on Sona BLW: Order flow, revenue mix
Sona BLW went through its order book and deleted Rs 3,600 crore worth of orders that were unlikely to materialise. These were orders that had been sitting there for years without progress or any firm visibility. In other words, the company realised these deals were not dependable, so it cleaned them out instead of keeping them on the books just to show a bigger number.
Nuvama’s point is that after removing these weak or outdated orders, the remaining order book now shows only the business that has a real chance of going ahead, which makes the company’s reported pipeline more honest and more useful.
Nuvama banks on the fresh set of opportunities emerging across Europe as three driveline competitors Winning BLW, Neapco Europe and AIMS have filed for bankruptcy. The brokerage estimates a potential Rs 2,500–3,000 crore, opportunity from this disruption. They expect order wins to trickle in over the next 12 months, although production could begin only in 2028.
Sona’s railway unit, recently acquired, is already reshaping the mix. The railway segment contributed over 20% of Q2 FY26 revenue and carries an order book of Rs 1,300 crore, most of which needs execution within a year. Nuvama expects the segment to reach Rs 1,500 crore revenue by FY28. The product list spans couplers, brakes, HVAC systems, dampers, air springs and electrical panels, adding a layer of diversification that was missing earlier.
Nuvama’s view on Sona BLW: Operational drivers
The traction motor programme remains one of Sona’s strongest levers. The company claims to be India’s largest traction motor producer for electric vehicles, and the brokerage sees this as credible given the installed capacity and customer spread. The ferrite-based motor under development for two-wheelers, three-wheelers and light commercial vehicles is positioned as a cost-stable alternative to rare-earth magnet motors, which typically carry geopolitical and pricing risk.
On the geographic front, North America’s revenue share dropped to around 30% in the first half of FY26 from 41% in FY25 as a key EV model underperformed. That diluted concentration risk but also underlined how sensitive the company remains to individual OEM volumes. Production in Mexico has begun for differential assemblies, which helps cushion tariff exposure for US-bound shipments.
Sona continues to invest heavily in R&D. The company has nearly 500 engineers and spent roughly Rs 110 crore on R&D in FY25, about 3.2% of revenue. The development pipeline stretches into areas far outside automotive, from humanoid robotics to advanced mobility platforms. These may or may not convert to revenue, but they indicate a long horizon for product bets.
Nuvama’s view on Sona BLW: Financial outlook
Nuvama expects revenue to rise to Rs 6,124 crore by FY28 from Rs 3,546 crore in FY25. EBITDA is forecast to reach Rs 1,559.8 crore from Rs 966.8 crore. The margin band of 24% to 26% is assumed to hold, even with the integration of the lower-margin railway unit.
The outlier year in the model is FY26. Capex is expected to surge to Rs 2,150 crore, sending free cash flow down to Rs 1,424.8 crore negative compared with a positive Rs 359.7 crore in FY25. Cash reserves could fall to about Rs 94 crore from Rs 1,301.6 crore. Intangible assets may rise to Rs 1,551.8 crore because of the railway acquisition, while fixed assets may almost double to Rs 4,390.3 crore. For investors, the question is not whether the spending is necessary it probably is but whether Sona can deliver returns quickly enough to justify the stress on the balance sheet.
Nuvama’s earnings model pushes FY28 EPS to Rs 15.1, and at current levels the stock trades near 32.8 times FY28 estimated earnings. That is rich, but the brokerage believes the visibility provided by the order book and the railway ramp-up leaves room for upside.
Nuvama on Sona BLW: Risks to watch
The upside case hinges on order conversions. Nuvama pointed out any slowdown in new programmes, especially in the EV space, would hurt revenue momentum. Product acceptance risk remains for items such as differential assemblies. According to them, the global EV demand remains patchy, and that is also a concern that the auto component firm needs to watch out for.
They added that the railway business brings integration uncertainty. According to Nuvama, working capital cycles differ, customer timelines differ, and so do margin expectations. The FY26 capex spike is another major risk. A year of sharply negative free cash flow will test management’s execution and investor patience.