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Informist, Thursday, Jan. 23, 2025

MUMBAI – Sona BLW Precision Forgings Ltd.'s earnings for the March quarter could be weak as one of its large customers is upgrading a major model into a redesigned version, the company's management said in a post-earnings webinar. This will adversely affect supply to the customer in the months of January and February as the customer will reduce the inventory for the outgoing model before gradually increasing production for the new model. Sona BLW expects to regain the revenue lost in January and February within the next two quarters, the management said.

The management said demand in Europe continues to be weak and it does not expect an imminent reversal of trends. The off-highway market in the US and the commercial vehicle segment in India continued to show weakness in the December quarter, which resulted in a production decline, the company said. Sona BLW has a significant market share in both these segments because of which the company's sales of differential gears and assemblies have been negatively impacted. The management hopes this trend could be reversed in the coming quarters.

The company's North American customers had a significant inventory build-up in the first half of the current financial year. This was followed by a significant reduction in inventory in the last couple of months, which affected the company's performance in the latest quarter. 

The company announced an investment of $4 million in ClearMotion, Inc. which will translate into a 1.5% stake acquisition.  ClearMotion specialises in developing advanced suspension systems controlled by software that can anticipate road conditions and adjust the vehicle's movement to significantly improve ride comfort and handling.

Sona BLW's margins declined on an on-year basis on account of adverse product and geographical mix, staying in the range of 27%, the management said. The company's battery electric vehicle segment revenues jumped 48% on year, while the segment's revenue share has increased to an all-time high of 39%. The management said the segment has seen strong growth in the last five quarters, contrary to reports about a slowdown in the electric vehicle segment. The company's global starter market share has improved to 4.4% from 4.2% as Europe and the US markets, where the company has a higher starter market share, have grown faster than Asia.

The company started production of advanced suspension motors, which contributed 0.2% of the company's Apr-Dec revenues. The management expects this product to be one of the four leading revenue contributors in the next three years.

The management said the potential tariff hikes by the US government would not affect Indian automakers. The tariff differential for auto components between the US and India is between 5% and 10%, which is not that high. The automotive industry is fairly important for the US economy. If the current US administration puts duty on auto components imported from Mexico, China, and India, their cars will be 15-20% more expensive.

Currently, it is a great opportunity for Indian automakers, especially with the recent rupee depreciation, the management said. The company expects India to be one of the fastest growing electric vehicle markets due to a low base and new launches. The management expects the three-wheelers and buses to go electric, without the need for the subsidies to encourage adoption.

The company's consolidated net profit was INR 1.51 billion for the December quarter, 14% higher than INR 1.33 billion in the same quarter last year. Analysts had expected it to report a net profit of INR 1.44 billion. Its revenue from operations for Oct-Dec stood at INR 8.68 billion, 11% higher than INR 7.82 billion a year ago. Analysts had expected a revenue of INR 8.61 billion for the December quarter. On Thursday, shares of the company closed at INR 542.60 on the National Stock Exchange, up 2.1% from the previous close.  End

Reported by Akshay V. Johnson and Sunil Raghu

Edited by Avishek Dutta and Akul Nishant Akhoury

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