Sona Koyo Steering Systems (SONA) Q2FY11 results were inline with our estimates as growth in domestic markets helped to double profits. On a sequential basis margins remained flat at 10.3%. With a 25% growth in net sales, profits doubled to Rs75mn as against our estimate of Rs83mn.Outlook: We have maintained our revenue as well as margin estimates for FY11 and FY12. Our earnings estimate for FY11 and FY12 are at Rs1.5 and Rs1.7 respectively.
VALUATIONS AND RECOMMENDATION The stock is currently trading at 12.1x its FY12E earnings. Considering the concerns on the business, we believe that at current price, the stock is fairly valued and reiterate our ‘HOLD’ rating with a target price of Rs22 discounting FY12E
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