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Sona BLW Precision: Driving Excellence in Automotive Components
In the dynamic world of automotive components one name has been making waves and capturing attention at an impressive pace Sona BLW Precision Share. This relatively new entrant has quickly become a prominent player in the industry, and in this blog, we willdiscuss about the fundamentals of Sona Comstar, chart its remarkable growth journey, dissect its strategic moves, and uncover what sets it apart in the realm of automotive parts.
Business Overview of Sona BLW Precision Share
Sona Comstar originally known as Sona BLW is an Indian company with a global reach. They specialize in making auto systems and parts and they’re really good at it.
What’s impressive is their wide presence, with nine manufacturing facilities in India, China, Mexico and the USA. Most of these are right here in India.
Sona Comstar’s expertise lies in designing and making advanced auto parts. They create things like differential assemblies, starter motors and more.
But what makes them stand out? They dominate the Indian differential gears market with a whopping 60-90% market share. That shows how much trust the auto industry places in them.
Their parts go into all sorts of vehicles from regular cars to electric ones. They’re all over the automotive spectrum.
To stay ahead, Sona Comstar is all about innovation. They invest in developing new mechanical and electrical systems plus software solutions to meet the ever changing needs of their customers.
With nine manufacturing plants and three R&D centers they have over 4,000 dedicated employees working hard to deliver top notch auto solutions.
Sona BLW Precision Journey: Milestones
Let’s take a quick trip through their journey:
- 1995: Sona Okegawa Precision Forgings Ltd. was born in partnership with Mitsubishi Metal Corporation Limited.
- 1998: They started producing differential bevel gears in Gurugram, Haryana, India.
- 1999: A new manufacturing facility opened in Chennai, Tamil Nadu, India.
- 2005: They expanded with a plant in Pune, Maharashtra, India, and Sona Autocomp Holding Private Limited became their majority shareholder.
- 2008: They acquired Thyssen Krupp's precision forging business, including BLW, known for Warm Forging Technology.
- 2013: They transformed into "Sona BLW Precision Forgings Limited" and earned the prestigious "North American OEM of PV's and CV's World Excellence Award (Silver)."
- 2016: The company won a Gold World Excellence Award, establishing itself as a top North American maker of vehicles. It expanded to China and received an investment from JM Financial Trustee. The partnerships with Mitsubishi and Metal One ended.
- 2017: The company grew by opening new plants in Gurugram, India, and starting a finishing plant in Mexico, North America.
- 2018: More expansion happened with land acquired for a new plant in Chakan, Pune. The company also got a contract to supply Differential Assemblies to a big Electric Vehicle Manufacturer.
- 2019: The company adopted a new name, "Sona Comstar," and began operations at the differential assembly plant in Manesar, Haryana, India.
- 2020: A big milestone was reached with 250 million gears produced, and the company secured contracts to supply BLDC (Brush Less Direct Current) motors to two major Indian electric 2-wheeler manufacturers.
- 2021: The company made its debut on Indian Stock Exchanges, which was a significant achievement.
Sona Comstar Business Segments
Sona BLW operates within two primary business segments each focusing on distinct product categories:
1. Driveline Parts Segment:
- This segment is dedicated to the production of components such as differential assemblies and precision-forged bevel gears.
- These components serve a diverse range of vehicles, encompassing both electric and traditional vehicles, including passenger cars, commercial vehicles, off-highway vehicles, and three-wheelers.
2.Motors Segment:
- Sona BLW is actively involved in manufacturing starter motors for a variety of vehicle types, including traditional, micro-hybrid, and electric vehicles (EVs).
- In addition to starter motors, the company specializes in developing motor control units and EV traction motors.
- These motors are utilized in hybrid and electric vehicles, including two and three-wheelers.
Sona BLW holds a significant position in the automotive industry catering to multiple segments such as Passenger Vehicles (PVs), Commercial Vehicles (CVs), Tractors and Off Highways (OHVs). It is noteworthy that the company is the largest manufacturer of differential gears for PVs, CVs and tractors in India. Additionally, it ranks among the top 10 global suppliers for both differential bevel gears and starter motors within the PV segment.
As of the calendar year 2022 (CY22), Sona BLW holds a substantial market share with 7.2% in global differential gears and 4.1% in starter motors worldwide. Domestically, the company maintains a strong presence, boasting an impressive 80-90% market share in commercial vehicles (CVs), 75-85% in tractors and 55-60% in passenger vehicles.
With a diverse clientele that includes renowned automotive manufacturers such as Maruti Suzuki, Renault, Nissan and Volvo, the company’s top 5 customers contributed 55% of its revenue in the fiscal year 2022-23. The top 10 customers accounted for an even more substantial 77% of the total revenue.
To nurture innovation and ensure a leading position in the industry, Sona BLW places a strong emphasis on Research and Development (R&D). In the fiscal year 2022-23, the company allocated INR 73.1 Crores for R&D initiatives, employing 273 on roll professionals across three centers located in Gurugram and Chennai.
In response to the growing trend towards electric vehicles (EVs), Sona BLW has strategically shifted its focus with the EV segment now contributing 26% of its revenue. The company actively participates in 46 EV programs with 27 different customers with Battery Electric Vehicles (BEVs) playing a significant role in the fiscal year 2022-23.
Looking ahead, Sona BLW’s strategic vision encompasses a concentrated effort toward light passenger vehicles, commercial vehicles and electric buses over the next three years. This strategic approach includes plans to expand its presence in Europe for differential assemblies and gears as well as in China for micro-hybrid starter motors and 48V Belt Starter Generator (BSG) systems.
In a recent development in the fiscal year 2023, the company made a significant foray into the sensors and software market by acquiring a 54% stake in Novelic. This move serves as a testament to Sona BLW’s commitment to innovation and diversification.
Fundamental Analysis of Persistent Systems
Sona BLW Precision Share Revenue Mix – By Geography
Sona Comstar’s revenue mix displays diversification in both geography and product categories. In terms of geographic revenue distribution, the company derives 29% of its total income from India while the majority originates from its global operations including 43% from North America, 20% from Europe and 8% from Asia and other regions.
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Sona BLW Precision Revenue Mix – By Product
Regarding product categories, the company’s profitability is underpinned by a diverse range of drivetrain components. Leading the way are Differential Gears,contributing 32% of the revenue, closely followed by Differential Assemblies at 23%. Micro/Plug in Hybrid Starter Motors and Conventional Starter Motors make substantial contributions at 21% and 15%, respectively.
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Sona BLW Precision Share Returns Over Various Periods
Sona Comstar has showcased impressive financial performance with a 44% increase in returns over six months. This is followed by a substantial 19% gain within one year and 5% growth over two years.
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Sona BLW Precision Share Key Financial Metrics
| Company Essentials | Value |
|---|---|
|
Market Cap |
₹ 34,167 Cr. |
|
Face Value |
₹ 10 |
|
Current Price |
₹ 583.65 |
|
52 Week High |
₹ 625.95 |
|
52 Week Low |
₹ 398.05 |
|
Industry P/E |
48.36 |
|
Stock P/E |
80.61 |
|
P/B |
17.37 |
|
Div. Yield |
0.48% |
|
Debt |
₹ 217.47 Cr. |
|
EPS (TTM) |
₹ 7.24 |
Sona BLW Precision Share Cash Flow (value in Cr.)
Between March 2019 and March 2023, Sona Comstar’s financial performance exhibited fluctuations across its various activities. Operating activities demonstrated consistent growth, increasing from 154 Crores to 533 Crores. On the other hand, investing activities followed a less predictable trajectory, hitting a low of -954 Crores in March 2020 and reaching a peak of -156 Crores in March 2021. Financing activities reached their highest point at 766 Crores in March 2020.
| Particulars (Consolidated) | Mar 2020 (Cr.) | Mar 2021 (Cr.) | Mar 2022 (Cr.) | Mar 2023 (Cr.) |
|---|---|---|---|---|
|
Cash from Operating Activity |
253 |
142 |
444 |
533 |
|
Cash from Investing Activity |
-954 |
-156 |
-353 |
-562 |
|
Cash from Financing Activity |
766 |
-66 |
-63 |
18 |
|
Net Cash Flow |
65 |
-80 |
28 |
-9 |
Annual Financial Overview
Sales Growth: Over the past four years, Sona BLW has witnessed remarkable sales growth, commencing at 1,038 Crores in March 2020 and surging to 2,676 Crores by March 2023. The most surge occurred between March 2021 and March 2022 with a remarkable 50.9% increase. While the growth rate moderated slightly to 25.6% between March 2022 to March 2023, the overall trajectory remains optimistic and promising.
Operating Profit Growth: The company’s operating profit has also grown steadily over the past five years starting at 200 crores in March 2019 and reaching 696 crores in March 2023. The most increase occurred between March 2020 and March 2021 with an impressive 81.5% rise.
Net Profit Growth: Net profit figures for the five years spanning from March 2019 to March 2023 reveal notable fluctuations. Notably, there was a remarkable 108.1% growth from March 2019 to March 2020 followed by a sharp -40.3% decline in the subsequent year. However, net profit rebounded with a 68.4% increase in March 2022 and continued to grow by 9.1% in March 2023, showcasing a mixed performance throughout the period.
Key Financial Metrics
Looking at Sona Comstar’s performance, we’ve seen some interesting trends in two key financial measures over the past five years.
ROE Ratio:
ROE Ratio or Return on Equity is like a report card for a company. It tells us how well the company uses the money its shareholders invested. A higher ROE means the company is good at turning shareholder’s money into profits.
- First, when it comes to Return on Equity (ROE), it started at a strong 62% five years ago, then slowly dropped to 19% over three years. In the most recent year, it settled at 18%, showing that the company’s performance has been fairly stable with a small decrease.
ROCE Ratio:
ROCE Ratio, which stands for Return on Capital Employed is a financial measure that tells us how well a company uses its money to make more money. If a company has a high ROCE, it means it’s doing a good job of using its money to make profits. But if the ROCE is low it could mean the company isn’t using its money very efficiently.
- Now, let’s discuss about Return on Capital Employed (ROCE). It began at 36% five years ago, had a slight dip to 22% three years ago, but then bounced back to 23% in the latest year. This suggests that Sona Comstar has been using its capital efficiently to make profits. Despite a temporary drop, the overall performance has been steady and healthy.
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Sona Comstar’s Stock Shareholding Pattern
Sona Comstar has a diverse group of owners. The people who started and run the company, known as the Promoters, own about 29.8% of it. The general public including individual and small investors have around 10.4% ownership. Additionally, there are big investors from within India (Domestic Institutional Investors or DIIs) who own 28.2% and there are also foreign investors (Foreign Institutional Investors or FIIs) who have a big chunk of 31.7%.
This means that both local and global investors are interested in Sona Comstar creating a good balance in ownership
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Conclusion
While Sona BLW Share enjoys a strong market presence and employs a diversified business strategy, it must proactively address the challenges associated with commodity price volatility and customer concentration. Implementing strategic measures to diversify risks and enhance resilience will be imperative for maintaining success in an ever-evolving automotive industry landscape.However, it faces two significant challenges:
1. Raw Material Price Volatility: The company is susceptible to fluctuations in the prices of essential raw materials, which can directly impact manufacturing costs. Despite efforts to manage this risk, the unpredictability of commodity prices may hinder the company’s ability to fully mitigate these fluctuations through price adjustments.
2. Customer Dependency: Sona BLW heavily relies on its top clients, with the top 10 customers contributing a substantial 77% of the total revenue. This high level of concentration poses a risk, as any significant reduction or cancellation of orders by these key clients could have a notable impact on the company’s financial stability.
Happy investing and thank you for reading!
Disclaimer:
This website content is only for educational purposes, not investment advice. Before making any investment, it’s important to do your own research and be fully informed. Investing in the stock market includes risks, and you should carefully read the Risk Disclosure documents before proceeding. Please remember that past performance doesn’t guarantee future results, and due to market fluctuations, your investment goals may not always be achieved.
