PL Stock Report: Steel Strips Wheels (SSW IN) - Visit Update - Steady core and expanding opportunities - Not Rated
Prabhudas Lilladher Pvt Ltd
Steel Strips Wheels (SSW IN) - Himanshu K Singh - Research Analyst,Prabhudas Lilladher Pvt Ltd
Rating: Not Rated | CMP: Rs280 | TP: NA
Visit Update - Steady core and expanding opportunities
Quick Pointers:
§ New products to help in revenue and margin growth.
§ Substantial capacity expansion plans to help grow faster than the industry.
We visited Steel Strip (SSWL) plants in Mehsana, Gujarat. The company along with Kalink Co. Ltd. (one amongst top 7 alloy wheel manufacturers in the world) had entered into a strategic alliance in Sept-15 for setting up this plant. The plant became operational in 2019 and currently has ~3mn alloy wheel capacity expected to expand to 4.8mn. 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 EVs and majority of its business is agnostic to powertrain. SSWL 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 5 years and help diversify its mix. SSWL aims to grow volumes by 12-16% in FY24, with revenue of ~Rs.45bn-47bn in FY24 v/s Rs.40bn in FY23 with export contributing Rs.5bn-6bn. The stock is currently trading at a valuation of ~17x FY24E and it could see EPS growth of 16-20% based on management volume and EBITDA guidance, in our view. Not Rated.