Investment Rating - The report downgrades Sona BLW to Market-Perform from Outperform, with a revised price target of ₹540, down from ₹550 [1][5][11]. Core Insights - The near-term outlook for Sona BLW has deteriorated due to several factors, including slowing US EV growth, potential phasing out of EV tax credits, and increased competition from Chinese OEMs [3][20][21]. - Sona BLW's order book is heavily reliant on EVs, with 77% of its orders tied to this segment, which poses risks given the current market conditions [30][34]. - Despite the downgrade, the long-term growth prospects remain positive due to strong design capabilities and a focus on new product offerings [4][48]. Summary by Sections Investment Implications - The downgrade to Market-Perform reflects limited upside potential and near-term risks, with a revised target price of ₹540 [5][11]. Financial Estimates - FY27-28 auto estimates have been lowered by 4-5%, while FY26 estimates remain unchanged due to the consolidation of the India rail business [4][11]. - Sona BLW's revenues are projected to grow from ₹35,460 million in FY25 to ₹53,544 million in FY27, reflecting a CAGR of 22.9% [9][45]. Market Dynamics - US EV growth has slowed significantly, with a forecasted increase of only 4-5% YoY in early 2025, contrasting with robust global growth of over 35% [14][16]. - Major US policy shifts, including potential cuts to EV subsidies and relaxed emission standards, are expected to negatively impact Sona BLW's growth [18][20]. Customer and Competitive Landscape - Sona's largest customer, a US EV OEM, is losing market share, which could adversely affect Sona's revenue [22][23]. - The competitive landscape is intensifying, with legacy OEMs rolling back their EV plans amid policy uncertainties [28]. Order Book and Execution - The mix of EV products in Sona's order book has increased to 77%, but execution may face delays due to reduced investments in the auto industry [30][34]. - A significant portion of Sona's revenue comes from North America, which accounts for 42% of total revenues, heightening the impact of US market conditions [35]. Long-Term Outlook - Despite current challenges, Sona BLW is expected to maintain a strong long-term growth trajectory, driven by innovation and market share expansion opportunities [48].