Steel Strips Wheels - Steady Core And Expanding Opportunities: Prabhudas Lilladher

Prabhudas Lilladher Report

We visited Steel Strip Wheels Ltd.'s plants in Mehsana, Gujarat. The company along with Kalink Co. Ltd. (one amongst top seven alloy wheel manufacturers in the world) had entered into a strategic alliance in September 15 for setting up this plant.

The plant became operational in 2019 and currently has ~3 million alloy wheel capacity expected to expand to 4.8 million. Management highlighted clear strategy of-

1. diversifying product portfolio,

2. expanding export market and

3. shifting its sales mix towards high-margin segments.

It is also working on wheels for electric vehicles and majority of its business is agnostic to powertrain. Steel Strip Wheel remains ahead on technology front, focused on weight reduction of products to offer superior quality and aims to shift its sales mix towards high margin segments like alloy wheels and exports.

We believe steady core business and ramp-up of new businesses will help expand revenue and margins with revenue growth expectation of ~9-10% on blended basis over next five years and help diversify its mix.

Steel Strip Wheel aims to grow volumes by 12-16% in FY24, with revenue of ~Rs 45 billion-47 billion in FY24 versus Rs 40 billion in FY23 with export contributing Rs 5 billion-6 billion.

The stock is currently trading at a valuation of ~17 times FY24E and it could see earnings per share growth of 16-20% based on management volume and Ebitda guidance, in our view.

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