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Informist, Monday, Apr. 28, 2025

By Gopika Balasubramanium

MUMBAI - Sona BLW Precision Forgings Ltd. will likely disappoint the Street with its March quarter earnings as it is expected to report a year-on-year fall in both consolidated net profit and revenue. A strong uptick in the company's traction motor business has failed to offset the fall in demand for its differential gear business, according to analysts. Weak international demand from electric vehicles, especially from the US, may also have led to the company's disappointing performance for the March quarter.

The automotive technology company's consolidated net profit for the March quarter is expected to fall over 1% to INR 1.47 billion, an average of estimates of seven brokerage firms showed. Sequentially, the bottom line is expected to decline nearly 3%. Kotak Institutional Equites has the highest estimate for net profit at INR 1.54 billion, while Motilal Oswal Financial Services has the lowest estimate of INR 1.36 billion.

The sales of the auto-parts maker are seen falling nearly 4% to INR 8.51 billion. The company's revenue will likely fall 2% sequentially. Kotak Equities has the revenue highest at INR 8.58 billion and Nomura Equity Research has the lowest at INR 8.44 billion.

The company's sales likely fell due to a ramp down in volume by its global electric vehicle customer, according to analysts. Orders from electric vehicle business formed 76%, or INR 176 billion, of Sona BLW's total order book of INR 232 billion as of Dec. 31. Nuvama Institutional Equities believes a changeover in models for a major North American customer could have led to a decline in revenue for the March quarter. Additions in order book and the share of electric vehicle business in sales are the key factors to monitor, brokerage said.

The company's gears business showed slow growth in the quarter ended March likely due to weak underlying demand for passenger vehicles, commercial vehicles, and off-highway vehicles and also due to a slowdown in their production, according to analysts. A double-digit on-year decline in the differential assembly business is mainly due to a drop in orders from an overseas electric vehicle customer, Kotak Equities said. In addition to this, weakness in the underlying automotive segment demand in the US and EU markets has also negatively affected the company's revenue growth, the brokerage said. The differential assembly segment formed 28% of the company's revenue for the nine months ended Dec. 31.

The company's motor business showed strong growth, which was driven by an increase in volumes of electric two wheelers, ICICI Securities said. The micro-hybrid starter motor business grew by mid-single-digit due to new order wins, Kotak Equities said. 

The company's earnings before interest, taxes, depreciation, and amortisation are expected to decline significantly in the March quarter. Sona BLW's March quarter EBITDA is seen at INR 2.24 billion, down nearly 10% from the year-ago quarter, as per average of estimates from seven brokerages. Sequentially, it will likely decline a little over 4%.

ICICI Securities expects the company's EBITDA margin for the quarter to decline 150 basis points on year mainly due to an unfavourable product mix and negative operating leverage. Nomura expects the company's operating margin to decline 80 bps on quarter to 26.2%, primarily due to an adverse mix. The EBITDA margin will likely see a contraction due to lower share of revenue from the US, Nuvama said.

For the quarter ended December, Sona BLW had posted a consolidated net profit of INR 1.51 billion, up 14% on year. The revenue for the quarter was up 11% on year at INR 8.68 billion. The stock is currently down nearly 13% from the level when the company announced its December quarter earnings on Jan. 23. Monday, shares of Sona BLW closed over 2% higher at INR 463.25 on the National Stock Exchange. The company will announce the Jan-Mar earnings on Wednesday.

Following are the Jan-Mar earnings estimates for Sona BLW Precision Forgings based on reports from seven brokerage firms in descending order by the estimate of net profit:

End

Edited by Ashish Shirke

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