Steel Strip Wheels: Buy for medium to long term investment for appreciation of ~25%

Hem Securities | July 16, 2010, midnight


  • SSWL  is  a  part  of  the  Steel  Strips  Group,  headquartered  in Chandigarh.  It  is  engaged  in  the  manufacturing  of  single  piece steel wheel rims for scooters, passenger cars, utility vehicles and tractors. It supplies rims to almost all major manufacturers of two wheelers,  three  wheelers,  four  wheelers,  tractors  and  heavy commercial  vehicle.  SSWL  has  strong  market  share  in  all segments. It captures 50% in passenger car, 38% in Tractors, 40% in Commercial Vehicles and a lion share of 70% in OTR.

  • The company has registered decent results for the quarter ending June  2016. The standalone revenues grew by  11.23% to Rs.325.40crores vs.  Rs.292.54  cr. in the  year  ago  quarter.  Operating profit grew  at  Rs.43.14  crores  as  against  Rs.32.56  crores  in  the corresponding  quarter  last  year;  representing  growth  of  32.5%. The adjusted net profit surged sharply at Rs.18.59 crore as against Rs.12.15 crore, depicting a sharp growth of 53% y-o-y.

  • SSWL  has  achieved  highest  ever  monthly  sale  of  wheel  rim  in July 2016 at 12.63 lakhs vs 11.65 lakhs; representing a 8.4% y -o-y growth.  The  company expects to clock record  second quarter  to reach  38  lakhs  wheels  vs  33.68  wheels  y-o-y  indicating  close  to 13% volume growth for Q2.  The passenger car segment grew 3% y-o-y, 2&3 wheelers grew sharp at 35%, Truck sales muted by 7%, tractor wheels grew 9% and exports degrew by mere 1.7%. SSWL has been a continuous and prestigious winner of orders of wheels  from  across  the  domestic  and  global  automobiles companies.

  • With  strong  and  continuous  order  flow,  cost  saving  initiatives, improving  capacity  utilizations,  volume  growth,  technical collaborations  and  benefit  of  upcoming  Alloy  wheel  plant;  SSWL growth trajectory is visible.  We believe the company  is trading at an attractive  valuation  at  10.13x  and  8.27x  of  standalone  FY17 EPS  of Rs.50.54  and  FY18 EPS  of  Rs.61.88.  We  initiate  a  ‘BUY’  on  the  stock with  a  target  price  of  Rs.640  (appreciation  of  about  25%)  with  the medium to long term investment horizon.


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