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.
blog comments powered by Disqus