The improving demand for passenger vehicles and the rising adoption of electric vehicles worldwide has bolstered shares of automobile ancillary companies in the recent months.
Shares of companies have seen strong buying by investors across the fraternity, including foreign, domestic, and retail.
Mutual funds have increased their holdings in auto ancillary makers across the board for three quarters in a row. Foreign institutional investors and retail investors too, have raised their ownership in some of the names.
One stock that has seen buying across the investor fraternity is Sona BLW Precision Forgings.
The holding of mutual funds went up sharply to 21.78 percent in Sona BLW at the end of December, from 14.16 percent in March. The holding of FIIs has risen to 11.27 percent in December-end from 8.79 percent in March-end.
At the end of December quarter, non-institutions’ holding in the global auto component supplier was 10.83 percent, compared to 7.61 percent in March-end. Individual investors increased their stake to 8.49 percent from 6.23 percent in three quarters.
Companies like Sona BLW, GNA Axles, Samvardhana Motherson International, UNO Minda, Sansera Engineering, and Subros have reported more than 10 percent growth in both sales and profit in the quarter ended December.
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Most of the stocks have given positive returns so far in 2023, and analysts expect this upmove to sustain in most of them.
Electric vehicle penetration is on a fast-charge mode in overseas markets and India and this has been on the back of affordability as well as availability.
Brokerage Emkay Global Financial Services expects the share of electric vehicles in the overall passenger vehicle segment to increase to 20% in FY30 from 1% in FY22. In the two-wheeler space, the share of EV is seen rising to 46% in FY30 from 2%.
The brokerage is, therefore, bullish on Uno Minda, Motherson Wiring, and Samvardhana Motherson.
Analysts are also positive on Sona BLW given the company’s strong position in the battery EV segment. The battery EV share in the company’s overall revenue has increased to 25% from 23% in FY22.
“We remain positive on the stock and expect good growth in the long term, supported by revenue visibility from order book, increasing EV penetration and companies focus on BEV portfolio,” brokerage Anand Rathi said in its note.
The brokerage has maintained a “buy” rating on Sona BLW stock with a target price of Rs 630.
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A global EV OEM has awarded the company a new program to supply electronic differential lock (EDL) for their upcoming BEV model. This program has added Rs 3,350 crores to our order book and is the single largest new order win in our company’s history. The program’s start of production is in H2 FY24.