SONACOMS Q1 FY24 earnings call.
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Revenue
₹732 Cr
verified against source
Revenue YoY
24%
reported change
EBITDA
₹203 Cr
latest reported figure
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Actual signal trajectory
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What the record says.
Sona Comstar delivered its highest ever quarterly EBITDA of INR 203 crore in Q1 FY24, driven by 24% YoY revenue growth to INR 732 crore and 360bps margin expansion to 27.8%. The outperformance came despite INR 25 crore revenue shortfall from FAME II subsidy reduction impacting EV two-wheeler demand. EBITDA and PAT grew 43% and 48% respectively, reflecting favorable product mix and operating leverage. The order book expanded to INR 220 billion with 78% from EV programs, adding INR 13 billion in new orders this quarter. Key wins include entry into Class 5 electric truck differentials (North America), electric tractor traction motors, and high-voltage bus motors via Equipmake partnership targeting 2025 commercialization. North America maintained 43% revenue share while Europe recovered to 23%. The company expects full-year INR 100-120 crore revenue impact from EV two-wheeler weakness but guides traction motors as fastest-growing segment. Management targets medium-term EBITDA margins of 25%-27%, with ~60% of order book conversion expected in the first five years. Key risks include EV two-wheeler policy uncertainty, customer concentration in EV revenue (70-75% with top customer), and PLI approval delays.
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Guidance to track
- Management maintained its consistent guidance that margins will remain in the 25%-27% range on an annual basis over the medium term, despite quarterly fluctuations.
- Despite EV two-wheeler weakness, management expects traction motors to be the fastest growing product segment for FY24 due to new programs and customer additions coming online.
- Full-year estimate of INR 100-120 crore negative impact on budgeted revenue from EV two-wheeler category due to FAME II subsidy reduction, with INR 25 crore impact in Q1.
- High-voltage traction motors and inverters (100-440 kW range) via Equipmake partnership expected to begin commercial production in 2025, targeting bus, CV, and LCV applications.
Risks flagged
- Management acknowledged that EV two-wheeler demand remains subdued due to phase II subsidy reduction, though July retail data showed slight improvement. Full recovery timeline remains uncertain.
- The Novelic acquisition has been delayed from earlier expectations, now expected to close next month (from call date). This pushes back consolidation benefits and any EV sensor synergy realization.
- Top EV customer represents 70-75% of EV revenue, creating concentration risk. While top 5 customers overall are below 60%, the EV segment specifically has significant single-customer exposure.
- Management acknowledged these product development partnerships have not yet yielded commercially viable products. Success probability remains between 0-100%, representing unquantified R&D risk.
Key quotes
- This is our ninth earnings call, and I think we've answered it nine times. We expect our margins to remain in the range of 25%-27% over the medium term, and it shouldn't change that much.
- We wanted to emphasize these wins as they are meaningful for the future of both businesses, financially as well as directionally. The progress we made in only 2 years is quite remarkable, I mean, sometimes even to ourselves.
- I suppose you were asking about the Novelic transaction. It is indeed delayed. We are expecting to close this next month.
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