Saietta (LON: SED) shares are up 15% this morning on the announcement of a new order in India. Well, that’s good, gaining a new client always is good. But there might be a little bit too much excitement here. The shares are already falling back in fact. For while it is a new order the numbers being bandied about are expectations of sales over time. This is not the same as the orders that have actually been booked.
The announcement: “Saietta Group plc (AIM: SED), the multi-national business which designs, engineers and manufactures complete electric drivetrain (eDrive) solutions for electric vehicles, announces that its 49.5% owned Indian joint venture, Saietta VNA, has received an order for complete eDrives from its lead Indian client for a second of their light commercial vehicles.The customer is a global OEM (Original Equipment Manufacturer) and one of the largest producers of light commercial vehicles (LCVs) in the Indian market.” OK, that’s good and all that. And a number being bandied about is £12.7 million. “Saietta Group PLC (AIM:SED), the electric drivetrain technology specialist, has landed a second deal via its Indian joint venture worth around £12.7 million from an existing manufacturing (OEM) client. The agreement involves the supply of complete electric drivetrains (eDrives) for a new model of light commercial vehicle (LCV).”
And that’s not entirely correct. For that’s the estimated value over time if the product is indeed manufactured using Saietta’s drive trains. Which isn't guaranteed as yet at all. The actual order is rather smaller: “The purchase order is for approximately £106,000 of systems for the pilot production over the next c3 months. Target volumes indicated by the client, subject to further purchase orders, are expected to commence in Q2 2024 generating revenue for Saietta VNA of approximately £12.7 million in the first year of production, with an expected minimum of 60,000 orders over a 5 year period.”
Saietta share price from Google Finance
Sure, it’s good news. Obviously you’ve got to have pilot production before full manufacture. But this is still only someone working on the technology, not a firm commitment to buy in those large volumes.
We’ve looked before at Saietta: “An order worth roughly £5 million is indeed significant for a company of Saietta's size. The question for us out here is whether this is enough? We can imagine that the corner has truly been turned, that the supply chain is in place, that customers seem to exist. Therefore, being in that fashionable market, stonks is the limit and all that? Or, equally, we might think that this is early days yet, we need to see a more significant amount of business flowing through. And, perhaps more importantly, we need to see that the supply chain actually delivers to order and on time and price.” And, well, that didn’t work out so well actually, the share price today is a third of what it was back then.
As and when - if even - Saietta starts to deliver in volume then that’s when it’ll be worth thinking about whether they really have turned the corner or not.