Sona BLW Beats Estimates With Q2 Results, Inks Pact To Acquire Escorts Kubota's Railway Business
Sona BLW has entered into an agreement with Escorts Kubota to acquire its railway equipment division for an enterprise value of Rs 1,600 crore
Sona BLW Precision Forgings Ltd. posted a 17% year-on-year growth in consolidated revenue at Rs 925 crore in the quarter ended September, which was higher than analyst estimates of 13% growth.
The company also surpassed the net profit estimates, as it logged a 16% YoY growth to Rs 144 crore.
Apart from declaring its quarterly results, Sona BLW announced the signing of a pact to acquire Escorts Kubota Ltd.’s railways equipment division. With this acquisition, Sona BLW is set to enter the rail components sector.
Sona BLW Q2 Results Highlights (Consolidated, YoY)
Revenue up 17% at Rs 922 crore versus Rs 787.4 crore (Bloomberg estimate: Rs 894 crore)
EBITDA up 14.5% at Rs 252 crore versus Rs 220 crore (Bloomberg estimate: Rs 249 crore)
Margin at 27.6% versus 28.2% (Bloomberg estimate: 27.9%)
Net profit up 15.7% at Rs 144 crore versus Rs 124 crore (Bloomberg estimate: Rs 142 crore)
Enters Rail Component Business
Sona BLW has entered into an agreement with Escorts Kubota to acquire its railway equipment division for an enterprise value of Rs 1,600 crore, a press release noted.
Escorts' railway division is a leading supplier of critical components, such as brakes and suspension systems for various rolling stocks.
The company's railway equipment division reported a revenue of approximately Rs 950 crore and EBIT of Rs 179 crore in fiscal 2024.
The proposed acquisition of this division is expected to be earnings accretive for Sona BLW right from the first year and offers significant growth opportunities, the release added.
This acquisition fits with the company’s vision statement targeting growth with a long term product relevance, which is not limited to the automobile sector.
Notably, Escorts’ railway equipment division is the market leader in railway brake systems in India. Started back in 1961, it is one of the oldest among legacy players in the railway component business.
For fiscal 2024, the company reported revenue of Rs 950 crore versus Rs 841 crore in the preceding fiscal. EBIT margin grew to 18.9% from 13.8% in the year-ago period.
Key Takeaways From Q2 Results
Out of the Rs 925 crore of revenue reported by Sona BLW in the September quarter, the share battery electric vehicles business stood at 36%, or Rs 317 crore. BEV revenue grew 53% compared to last year.
Ebitda margins had a one-time ESOP impact of Rs 8.3 crore during the quarter under review. Adjusting for this, Ebitda for the quarter would have grown by 18%.
The company successfully raised Rs 2,400 crore via QIP in the September quarter. This will be used to pare down some existing debt as well as fund the acquisition of Escorts’ rail division, the company said in its quarterly conference call.
In the electric vehicle segment, Sona BLW currently has 56 EV programs for 32 different customers. Out of these programs, 30 are in India. The rest are export-oriented, with majority of them in North America.
For first half of FY25, the revenue mix is also split with North America constituting 44% of total revenue, followed by India with 28% share and Europe with 22%. The remainder of the revenue was split between Asia and rest of the world.
Going forward, Sona BLW's prospects are strong with the company having an order book of Rs 23,300 crore. This is roughly seven times the company’s full year revenue of fiscal 2024.
Shares of Sona BLW closed 1.38% higher at Rs 644.1 apiece on the NSE, compared to a 0.15% decline in the benchmark Nifty 50.
