SONACOMS - Sona BLW Precision Forgings Limited Share Price

In the Q4 FY25 earnings call, management provided a cautious yet optimistic outlook amid ongoing market disruptions. Despite challenges, Sona Comstar achieved its highest-ever net profit of Rs.164 crores, up 10% from the previous year, although revenue declined by 2% to Rs.868 crores due to customer model transitions. The company's BEV revenue grew by 8% to Rs.294 crores, contributing 34% to total revenue, demonstrating resilience in the electric vehicle segment.

Management expressed concerns over U.S. tariffs and global supply chain complexities, particularly regarding dependence on China for rare earth materials. They anticipated that the trade war could disrupt demand but also create opportunities for stronger players in the industry. With a record order book of Rs.24.2 thousand crores ($2.8 billion), 77% of which is attributed to EVs, the company is well-positioned for future growth.

In terms of strategic initiatives, Sona Comstar is venturing into humanoid robotics components, noting that it could be where EV technology stood in 2016, emphasizing their commitment to R&D and diversification. Management highlighted advancements in battery technology and projected that BEVs could reach price parity with traditional vehicles by 2030.

For FY25, the company reported a revenue growth of 12% to Rs.3,555 crores and a significant 38% increase in BEV revenue, underscoring the shift towards electrification. Key forward-looking points include plans for new product development, a focus on high-voltage traction motors, and evergreen opportunities in the evolving mobility and automation markets.

Question 1: "While there's been a lot of uncertainty relating to tariffs, how are the customers reacting to this? What are you seeing in terms of schedules and long-term thinking? Is there a need for you to evaluate setting up facilities outside India in the US?"

Answer: "We have received more inquiries from investors than from customers, indicating that most clients remain stable despite tariff uncertainties. Currently, there's minimal risk affecting 3% of our revenue. We have existing facilities in Mexico and the US, and while we're not ruling out future investments, we're waiting for clearer conditions before committing any resources."

Question 2: "Could you clarify the PLI accrual for this quarter and full year?"

Answer: "We won't disclose PLI numbers separately due to confidentiality, but we've recognized full year PLI income in Q4, approximately 19 crores attributed to the first three quarters' efforts in securing certifications and approvals."

Question 3: "Is there any impact of China's restriction on rare earth magnets on the production of traction motors?"

Answer: "At the moment, we have sufficient inventory to operate without disruptions. We're collaborating with suppliers to secure export licenses and exploring alternative materials to overcome potential supply constraints."

Question 4: "Are we largely done with the inventory restocking at the key customer? By when do you expect normalized sourcing from the customer?"

Answer: "It's too early to determine how quickly normal production will resume after the launch of their new model. We expect to have clearer visibility by the end of June regarding the ramp-up timeline."

Question 5: "Who do you think is likely to absorb the tariffs?"

Answer: "Tariffs will ultimately affect consumers, as neither manufacturers nor suppliers can typically absorb high tariffs. The adjustment will reflect higher product prices, and demand will likely decline due to increased costs, although how significant this will be remains to be seen."

Question 6: "What stage of development are we at regarding humanoid robots, and how does our competitive positioning compare to others?"

Answer: "While we have made significant strides in development, success will hinge on obtaining orders. The huamnanoid market is currently dominated by Chinese players, but as supply chains shift globally, opportunities for us may arise given our strong capabilities in relevant technologies."