Escorts Kubota Falls 10%, Sona BLW Precision Rises 14% On Railway Biz Deal; Know Details – News18

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Escorts Kubota Falls 10%, Sona BLW Precision Rises 14% On Railway Biz Deal; Know Details – News18


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Escorts Kubota Ltd on Wednesday said it will sell its railway equipment business division to Sona BLW Precision Forgings Ltd for Rs 1,600 crore

Acquisition of railway biz of Escorts Kubota lift Sona BLW 11%

Shares of Sona BLW Precision Forgings Ltd (Sona Comstar) climbed 14 per cent in Thursday’s trade, while those of Escorts Kubota’s fell nearly 10 per cent after the former announced the acquisition of the Railways Equipment Division of the latter for Rs 1,600 crore.

“We are delighted to step into the railways components sector with the signing of the agreement to acquire the Railway Equipment Division of EKL. The proposed acquisition of the Railway Equipment Division aligns with our vision statement as we expand into the broader mobility sector. Once completed, the ‘Railway Equipment Division’ acquisition will enhance our clean mobility product offerings by adding a market-leading railway components business,” said Vivek Vikram Singh, MD & Group CEO of Sona Comstar.

Railway Equipment Division of Escorts Kubota is a leading supplier of critical components for Railways, such as brakes and suspension systems for various rolling stocks. It reported revenue of approximately Rs 950 crore and approximately Ebit of Rs 179 crore in FY24.

The proposed acquisition of the Railway division is expected to be earnings accretive for Sona Comstar right from the first year and offers significant growth opportunities, Sona BLW said.

“The railway industry presents long-term growth opportunities, and with the ‘Railway Equipment Division’ business, we see significant potential to broaden our product range by incorporating advanced technology and engineered products,” Singh added.

Furthermore, the acquisition of RED is subject to customary closing conditions, including the receipt of regulatory approvals.

“Prima facie, we see this deal (acquisition of RED) as a strategic positive for Sona Comstar’s long-term growth owing to large and fast-growing addressable market (Railway capex has grown at 17 per cent CAGR over FY15-24 to Rs 2.6 trillion) and will help the company to further diversify its product / customer mix. This increases growth longevity for the company especially in the light of slowing global EV adoption,” said Ronak Mehta and Vivek Kumar of JM Financial in a note.

Escorts Kubota said the objective of the sale is to align with the vision of Global Kubota, and exit from non-core businesses. Following this, Nuvama has reduced its FY26–27 EPS estimates by 5–8 per cent for Escorts Kubota as it felt the loss of Railway profit may be only partially offset by increase in other income.

“Despite this development, we retain positive view on robust medium-term prospects due to Global Kubota’s support in the form of a merger of Kubota India trading entity, technology support and opening up of export opportunities. We expect revenue/EPS CAGR of 17 per cent/20 per cent over FY24–27E,” it said.

Escorts has retain ‘Buy’ with a target price of Rs 4,650 against Rs 5,000 earlier.

In the case of Sona BLW, Nuvama said the deal is EPS-accretive as it implies a reasonable FY26E EV/Ebit valuation of 7 times. This acquisition leads to diversification to the Railway space, which has considerable entry barriers, it said.

“This acquired entity is the market leader in braking systems, and also supplies couplers, suspension and other parts. Furthermore, it’s RoCE is 35 per cent. We expect this entity to contribute 17 per cent/1 per cent% to Sona’s FY27E revenue/Ebitda,” it said.

Nuvama retained its ‘Buy’ rating on Sona BLW with an unchanged TP of Rs 780 based on 50 times Sep-26E EPS for core and 25 times September 2026E EPS for the Railway business.

MOFSL said despite the volatile geopolitical scenario impacting different key geographies globally, Sona Comstar reported PAT growth of 20 per ecnt YoY in 2QFY25, driven by healthy order execution and its focus on the growing EV segment.

“However, valuations at 60 times/48 times FY25E/FY26E consolidated EPS largely factor in these positives. Reiterate Neutral with a target price of Rs 685 (based on 46 times Sep’26E consolidated EPS),” it said.

Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

News business » markets Escorts Kubota Falls 10%, Sona BLW Precision Rises 14% On Railway Biz Deal; Know Details



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