Citi says 'buy' Sona BLW due to this key differentiator, but sees lesser upside

Global brokerage firm Citi has maintained a 'Buy' recommendation on Sona BLW Precision Forgings Ltd. but has slashed its price target to ₹570 per share. This target implies a potential upside of 17% from its last closing price.

According to the brokerage, a key differentiating factor between Sona and other Indian business-to-business (B2B) part makers is the company's large order book. While the order book remains strong, there are potential near-term risks—

- Lower global demand.

- Possible delays in existing orders.

Meanwhile, the planned US tariffs on imports pose varying risks to the auto sector across South and South-east Asia, ratings agency Moody's wrote in a note on March 17.

The ratings agency believes that within the auto and auto components sector in India, stocks like Tata Motors Ltd. and Samvardhana Motherson Ltd. are at risk from the reciprocal tariffs that come into effect on April 2.

India's vehicle exports to the US are around 3% of the overall figure for India. Auto-part suppliers and luxury carmakers who sell directly to the US or indirectly through their operations in Canada and Mexico, will be subject to tariffs.

"The impact of higher tariffs on the profitability of carmakers and auto-part suppliers will depend on how much of the tariffs they pass on to customers," Moody's said.

For Samvardhana Motherson, Moody's wrote that the company generates around 20% of its revenue from the US, which also includes revenue from jobwork locations like Mexico.

Of the 18 analysts that have coverage on Sona BLW Precision Forgings, 15 have a 'Buy' rating on the stock, while three have a 'Sell' rating. JM Financial and Systematix Group have the highest target on the stock at ₹725, while Citi and Avendus Spark has the lowest at ₹570.

Shares of Sona Blw Precision Forgings Ltd. are currently trading 0.63% higher on Tuesday at ₹489. The stock is down 17% so far this year.

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