Steel Strips Wheels Q4 Results Review - Growth Drivers Remain Intact: Dolat Capital
Domestic revenue to see gradual recovery.
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Dolat Capital Report
Steel Strips Wheels Ltd. displayed weak margin performance in Q4 FY23 due to weaker geography mix, lower contribution from alloy wheels and higher raw material prices. Revenue grew by 7.1% QoQ to Rs.10.04 billion led by strong domestic demand partially offset by weaker export.
Ebitda grew 0.5 % QoQ to Rs.1.08 billion. Ebitda margin contracted 70 basis points QoQ to 10.8%.
Demand Outlook- Steel Strips Wheels' management expects to outperform industry growth with 12-15% volume growth. Management is confident about achieving export revenue of Rs 5- 6 billion FY24E versus 2.9 billion in FY23. However we expect improvement in export revenue to be gradual.
We expect earnings to grow at compound annual growth rate of 20% from FY23-25E led by-
healthy demand in the passenger and commercial vehicle segment and shift in volume in sports utility vehicles,
rising share of exports,
increasing presence in the high margin alloy wheels (passenger vehicle) segment,
de-leveraging balance sheet due to strong free cash flow generation and
improvement in return ratios leading to multiple re-rating.
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