Sona BLW Precision Forgings Ltd (Sona Comstar) delivered a resilient Q4FY25 performance amid sector-specific headwinds, geopolitical trade turbulence, and customer transitions. LKP Securities maintains a BUY recommendation with a revised 12-month target price of Rs 611, implying a 23% upside from the current market price of Rs 497. The target incorporates Rs 40 attributed to the newly acquired railway vertical. The report highlights the company’s solid BEV order book, expansion in export markets, technological advancements, and strategic hedging against US tariffs as key growth drivers.

Q4FY25: Marginal Revenue Dip Offset by Higher Profitability

Revenue for Q4FY25 stood at Rs 8,648 million, reflecting a YoY contraction of 2.2%, primarily due to a model transition from a major BEV customer. While BEV revenue grew 8% YoY to Rs 2,944 million, overall margins faced mild pressure from an unfavorable product mix.

EBITDA margin contracted by 119 bps YoY to 26.7%, impacted by cost headwinds and shifts in segmental contribution. However, profit after tax (PAT) surged 12.3% YoY to Rs 1,663 million, driven by a jump in other income, largely from QIP proceeds and interest on surplus cash.

FY25 Snapshot: EV-Focused Revenue Trajectory and Margin Resilience

Total revenue for FY25 rose 11% YoY to Rs 35,460 million. BEV-related revenues witnessed an impressive 38% YoY surge, increasing their share to 26% of total sales.

EBITDA stood at Rs 9,667 million with a 27.3% margin, marginally lower YoY due to higher ESOP charges amounting to Rs 276 million. Adjusted for these, EBITDA was up 9% YoY.

PAT margin improved to 17.5% as the company leveraged operating efficiency, reduced input costs, and capitalized on a robust order execution cycle.

Record Order Book Provides Multiyear Visibility

Sona Comstar booked Rs 47 billion worth of new orders in FY25, spanning 32 new programs and seven new customers. Net of revenue executed (Rs 31 billion), the order book reached an all-time high of Rs 242 billion.

EV programs now contribute approximately 77% of the total order book, reflecting the company's sharpened focus on electrification technologies and future-ready mobility platforms.

BEV Transition and Global Expansion: Strategic Advantages

The company secured a key driveline order from a North American OEM for a high-end EV SUV, with production to commence by Q4FY26. BEV contribution is expected to grow as 31 programs are already in production and another 27 are in the pipeline.

Geographic diversification is gaining momentum—India is projected to emerge as the largest market at 43% share, followed by North America (33%) and Europe (19%).

Innovation-Led Growth and New Market Entry

The firm commercialized a steering bevel box for commercial vehicles, showcasing its machining and forging capabilities. Furthermore, it plans to enter the humanoid robotics segment, focusing on actuators, sensors, and embedded software.

Actuators, which account for over 50% of humanoid robot BOM cost, will be a priority R&D area, leveraging Sona’s existing domain expertise.

Tariff Headwinds in the U.S.: Risk and Opportunity

While only 3% of revenue is at direct risk from upcoming U.S. auto tariffs, Sona’s competitive position could improve if competitors from China lose pricing advantage.

Tariff-induced supply chain disruptions may support long-term consolidation in favor of global players like Sona Comstar, which has diversified sourcing and global manufacturing assets.

Operational Highlights: CAPEX, Margins, and Balance Sheet Strength

The company is constructing a new facility in Mexico under Phase I with a CAPEX under $10 million. It is also evaluating a final assembly plant in the U.S., contingent on tariff-related clarity.

Net debt remains negligible, while cash and cash equivalents rose to Rs 10,475 million, supporting further investment in growth and R&D.

Financial Forecast and Valuation Metrics

LKP estimates a 3-year CAGR of 13.2% for revenue, 13.1% for EBITDA, and 12.3% for PAT through FY27E. Valuation is pegged at 45x FY27E EPS of Rs 12.7, including the impact of the railway acquisition.

Here’s a snapshot of key financial projections:

Long-Term Investment Case Strengthens

Despite near-term revenue headwinds and geopolitical challenges, Sona Comstar is strategically positioned for growth through its focus on electrification, diversified order book, and investments in innovation. The shift toward EVs globally, coupled with its operational readiness and robust R&D capabilities, underlines the company's strong fundamentals.

LKP Securities reiterates its BUY rating with a 12-month target of Rs 611, supported by long-term tailwinds, a healthy balance sheet, and clear execution visibility.