Global EV drive charges up Sona BLW Precision

Mumbai: As EVs rise on global sales charts, so should Sona BLW Precision. The maker of gears and motors could double its EV revenue – perhaps in a couple of years – as this vertical corners a disproportionate share of incremental sales. The share of revenue from the EV segment at the Gurgaon-based company has reached a fifth of the total by June, compared with just 1.3% in FY19.The share of EV revenues to the total is likely to improve to 40% in the next two years. The highest contribution is expected to come from gear sales to EV makers, where the company has a global market share of 6%. The company sees the market share doubling in the next four-five years, with more participation in EV programmes, higher wallet shares from existing customers and increasing business from new markets, particularly in Europe.Sona BLW’s competence in precision forging technology for gears has given it an edge over peers in the EV space, as it is able to address the higher power density, better torque and light weight requirements of EV makers at an economical price.There is a stiff entry hurdle for EV gear suppliers due to stringent requirements. Sona BLW is expanding its installed capacity of gears to cater to increasing demand. It has an installed capacity of 40 million gears a year. The company plans to spend around 1,000 crore over the next three years on capacity expansion, of which a sizable part will be spent on expanding gear production.In addition, rising penetration of EVs in the global market would benefit the company that could increase its content per vehicle. Content sold to EV makers by the company is about 4-5 times more expensive than items sold to conventional carmakers. Per unit realization of a gear set on EVs is about $75.The company has a total order book of 14,000 crore at end-June, equivalent to nine times of FY21 revenues. Of the total order book, about 57% of the total order book is from the EV segment. Revenues from the EV segment were 96.7 crore in June; annualized, this translates into 386 crore for the full year, which marks an 88% growth.Sona has won 58 programs from 27 customers across its product portfolio as of March 2021, of which 64% are yet to commence production.The motors segment side, which accounts for 30% of total revenue, may benefit from EV penetration in India, mainly from the two-wheeler and three-wheeler space. It has started brushless motors for local electric 2Ws and 3Ws and has become one of the leading suppliers in the Indian market.In addition, automakers particularly in Europe and China are looking at mild hybrid vehicles to meet corporate average fuel economy norms. This may boost the demand of brushless starter generator motors, a segment in which Sona is currently competing. The unit costs around $200.The stock is trading at 63 times its projected FY23 earnings, a premium of 40% to global EV suppliers.

from Economic Times https://ift.tt/3CskcBj