Huge capital base of this company (compared to its annual sales) is a matter of concern as it needs much higher PAT to achieve meaningful EPS
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What are you talking about? They have about 62 crore shares only. Their annual PAT is about 600 crores. I donât see any reason for concern. Please explain.
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62 crores shares at Rs 10 each makes it share capital of 622 Crores, which is quite high for company doing 600 Cr PAT. For example, other companies having 600 Cr+ Equity Capital are Avenue Supermart, Varun Beverages , LG Electronics whose PAT are 2000 Cr+. No other auto component company has such high equity base. Even companies like Maruti or Hero has equity base of sub 150 Cr
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Why is that an issue? Equity is a combination of Share Capital and reserves so that is what you would use for any ratios. Tomorrow if Sona gives Bonus shares, share capital will increase even further
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Interesting, but shouldnât really be an issue. Also, comparing consumer services with auto ancillary isnât a fair comparison, I believe.
Sona is positioning itself as a leader in mobility technology, if you look at the PAT from 2018, the company has delivered over 150% growth every 3 years from âš120+ crore to âš775+ crore in about 7.5 years. Thatâs quite impressive, especially considering the COVID impact and the cyclicality of the sector.
If the company announces an equity base expansion, it could scale even further right.
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I assume you have concerns about RoE. But that looks fine to me and is around 14.5%.
The equity base of old companies will naturally be small. That is not a fair comparison. The RoE will further improve every year as long as company grows.
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Please dont get too excited. That is my personal opinion. I am an investor in this company for quite some time and waiting patiently. In the past 5 years, they have announced so many such collaborations. But actually there were no real outputs. I had asked about past collaborations in their annual meeting and they were saying all these are kind of technologies which are still in the development phases, so it may or may not workout. You can dig out more on their past announcements with
- IRP Nexus Group Ltd. (Israel)
- Enedym Inc. (Canada)
- C-Motive Technologies (USA)
- Drive TLV (Israel)
Actually I have seen they announce such news when the stock price goes low. Also in the mean time, promoter was reducing his share holding percentage. So I am getting impatient after seeing all these announcements with out any real outcomes.
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Totaly agree.. Sona Comstar does have genuine EV exposure (traction motors, differential gears, etc.), but revenue visibility from these MoUs seems to be limited. Until any of these collaborations lead to commercial orders, theyâre more narrative-building than earnings-building.
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I think they have shared some timelines in the previous calls regarding * Enedym Inc. (Canada)* C-Motive Technologies (USA) related motors
This essential means that Blackstone rewarded some of the employees (76 in this case) with a percentage of the sale proceeds after selling SONA stocks. This arrangement would have been entered into sometime in the past, acting as incentive to work towards improving companies market value
yes, they do. ICE as % of total revenue is on significant decline as well, so even the direction of motion is aligned with the future