Sona Comstar BLW - Direct EV Play

Sona BLW Precis.

The picture looks like of one of those of arduous treks in the Himalayas. The investors who bought it with the hopes of it doing wonderous things due to its EV affinity had been let down with a thud.

So, is it giving an opportunity?

Not invested.

Good set of nos, Q3FY23.

Key Financial Highlights – Q3 FY23

  • Revenue of Rs. 685 crores with 39% YoY growth
  • 26% revenue share from Battery Electric Vehicles (BEV), BEV revenue growth of 29% YoY
  • EBITDA of Rs. 186 crores with a margin of 27.2% and 43% YoY growth
  • PAT of Rs. 107 crores with a net profit margin of 15.6% and 45% YoY growth
  • The net order book increased to Rs. 23,800 crores from Rs. 20,500 crores as of September 30th, 2022

Key Financial Highlights – 9M FY23

  • Revenue of Rs. 1,932 crores with 22% YoY growth
  • 25% revenue share from Battery Electric Vehicles (BEV), BEV revenue growth of 31% YoY
  • EBITDA of Rs. 494 crores with an EBITDA margin of 25.6% and 17% YoY growth
  • PAT of Rs. 276 crores with a net profit margin of 14.3% and 18% YoY growth
  • The net order book increased to Rs. 23,800 crores from Rs. 18,600 crores as of March 31st, 2022

Disclaimer: Holding, and accumulating. Not an investment reco. Consult your investment advisor before any investment decision.

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In todays press releases they have mentioned that they have won 3000+ cr order. This is very huge in my opinion and shows the ability of company to scale. If you look at depreciation expense it has almost doubled from 100 odd cr 3 years ago to 47 cr in latest quarter which is almost like doubling the assets. I think real benefits of these will start showing in future quarter may be starting next year.

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Can someone please send Q3FY23 concall highlights.

Still no justification on current valuations. Risky counter

Disc: - Not invested, watching hopelessly for expecting in reasonable valuations.

Auto ancillary valuations seem to be too high. The PE of Samvardhan Motherson Sumi is 61. Uno Minda 51. Bosch however seems to be the lowest among them at 39.

I am not sure whether such high valuations for any sector are justified.

Issue with such high valuation is possibility of losing money.
Growth can be there in these valuations too. But risk/reward is what investor should look at before investing and be calculative safe.

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The reason for the high valuations could be the visibility of the revenue based on the huge orderbook of 23,800 Cr to be executed over the next decade, and this orderbook just keeps increasing every quarter. The current orderbook is 73% for EV segment. Also their return ratios (RoE and RoCE) are in 20s, higher than normal auto ancillaries.

Superior profitability, revenue visibility, increasing proportion of EV business could be the reasons market valuing the company at such high levels, in my opinion.

Disc: Taken tracking position

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I really wonder how did they arrive at order book (someone need to ask in next concall). Haven’t seen any other auto component company talking about “order backlog”. This concept of order backlog only work for discrete project companies like L&T or Thermax etc. Most of the auto companies given Open PO ie. only per piece rate is given. Actual quantity to be supplied is communicated via schedules - one month fixed, rest 2 months tentative. These schedule change all the time…Hence any auto component supplier has visibility of max 3 months.

It may be that post ERP implementation, PO can not be released without entering annual quantity so companies tend to over estimate their requirement and put some quantity numbers (but they are not bound by that as it is always considered EAU - Estimated Annual Usage). So Sona may be adding up all these optimistic order values to arrive at order backlog. If so, it would be clearly a pipe dream.

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