Shares of Sona BLW opened higher on January 10 with the acquisition of Novelic, a Serbian company that designs sensors and software applications. Analysts see the deal as a growth opportunity in the autonomous driving space, expecting 27-44% gains.

The deal helped improve sentiment around the stock, which has corrected nearly 43% in the last year. It closed at Rs 422 on Monday and opened 5% higher today.

On January 9, the Indian auto parts maker announced that it would acquire a 54% stake in Novelic for €40.5 million (approximately Rs 356 crore), entering the advanced driver assistance system sensor market.

Novelic is a leading supplier of mmWave radar sensors, perception solutions and full-stack embedded systems.

Brokerage firm Nomura has a ‘buy’ call on Sona BLW with a target price of Rs 609, noting that the acquisition will bring a new dimension of growth to the auto parts specialist. Analysts say it marks Sona’s entry into sensors and software.

They added that the Serbian company’s short-wave radar technology best suits autonomy needs. The technology is cheaper than LIDAR (Light Detection and Ranging) and more accurate than cameras. Radar technology helps self-driving cars sense their surroundings to aid in navigation.

Analysts said Novelic is ahead of rivals in its field, and the acquisition could lead to significant growth as safety requirements under Europe’s New Car Assessment Program (NCAP) tighten.

CLSA has upgraded the stock to “buy” with a target price of Rs 535. Analysts at the brokerage also noted that the acquisition would open up new growth avenues for autonomous driving and connected cars. They added the ‘buy’ trades at 26 times 2022 profits, which should add to Sona BLW’s first-year earnings per share.