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Axis Securities Report
With a focus on fulfilling export demand from the U.S. and Europe, ramping up of alloy wheels, and aluminium knucklers division; and further diversification into the motor plus controller electric vehicle business (joint venture with Reddler Technologies) in the future, we value Steel Strip Wheels Ltd. at 17 times price earning multiple on our September 25, earning per share (rollover from March 23) [We switch from enterprise value/Ebitda of 5.5 times on strengthening balance sheet and lower net debt levels].
We maintain our 'Buy' rating on the stock with a revised target price of Rs 325/share (from Rs 240/share earlier), implying an upside potential of 22% from the current market price.
About the company
Steel Strips Wheels is a leader in designing and manufacturing automotive wheels – both under the steel and alloy categories. The company is based out of Chandigarh with manufacturing facilities at Dappar (Punjab), Oragadam (Chennai), Jamshedpur(Jharkhand), Mehsana (Gujarat) and Saraikela (Jharkhand).
These plants have a combined manufacturing capacity of about ~23 million wheels per annum. With the acquisition of AMW Auto component (pending regulatory approvals) Steel Strip Wheel is expected to add ~ 7 million steel wheel capacities in the future.
In FY23, steel wheels contributed ~69% (97% in FY19) and alloy wheels contributed 31% (3% in FY19) to total revenue of Rs 4,041 crore (~Rs 2,041 crore in FY19). It produced a total of ~1.76 crore wheel rims in FY23.
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