Sona Comstar shares rise 9% post-Q2 results; brokerages bullish amid strong revenue growth

"Q2FY27 was almost a perfect quarter for us, across all business metrics like financial performance, technology and new product development, new orders, cash flow generation and the conferring of the Deming Award after a nine-year quality journey," MD and group CEO Vivek Vikram Singh said. Its revenue from the battery electric vehicle segment surged 129%, and its share of auto business revenue reached an all-time high of 51% in the quarter.

Its net order book stands at Rs 25,100 crore, with Rs 3,600 crore added during the second quarter. At 1 pm on October 27, Sona Comstar shares were trading 9.2% higher at Rs 856 apiece. "We also commercialised three new products, our highest-ever in a quarter, which include a helical limited slip differential for EVs, air springs for railway passenger coaches and rear radar sensors for two-wheelers," Singh said.

As per the company's investor presentation, EBITDA rose 23% to Rs 356.2 crore, while margin reduced to 23% from 25.3% in the year-ago period. "The margin was lower due to product mix and higher input prices, partially offset by the positive impact of operating leverage. PAT margin was lower by 0.5% due to lower EBITDA margin, partially improved by lower depreciation cost as a% of revenue," the company said.

Bernstein gave 'Overweight' rating for the stock with target price of Rs 850. "Q2 revenue growth (+35% YoY) reflects several levers coming through together: traction motors gaining share, strong recovery in differential assemblies, & suspension motors scaling in China. Business enters H2 with a broader base of growth and further programs to ramp," the global brokerage said. "While declining percentage margins will understandably attract attention, don’t think earnings case require a return to historical peaks while revenue opportunity continues to expand.

Management has, however, retained its 23-25% EBITDA margin framework," the brokerage added. Global brokerage Citi gave 'Buy' rating for stock and raised target price to Rs 960. "Strong beat in 2QFY27 results, driven by a robust revenue growth. Suspension motors, traction motors and differential assemblies segments saw strong trends. Demand outlook remains positive, with tailwinds for global EVs as well as domestic E2W sectors.

New products are likely to result in Sona’s growth being higher than underlying industry’s. "Orderbook trends improved with (Rs 25,100 crore now vs Rs 24,000 crore as of Q1FY27 end). That said, margins are likely to remain under pressure, given 1) severe material cost inflation, 2) increase in freight rates, and 3) mix shift towards 2W traction motors (low margin)," added Citi.