Why Shares Of This Wheel Rim Maker Are Rallying

Shares of Steel Strips Wheels Ltd, a rim supplier to automakers, have been rallying this year on a strong order pipeline from large car and truck makers.

The stock rose as much as 15 percent today, the highest in more than a year. Steel Strips has gained 80 percent so far this year. That compares with a 22.4 percent rise in the benchmark Nifty Auto index. The Chandigarh-based firm counts Maruti Suzuki Ltd., Mahindra & Mahindra Ltd., Tata Motors Ltd., Honda Seil Cars Ltd., BMW and Jaguar Land Rover among its clients.

Tata Steel, Japan's Nippon Steel & Sumitomo Metal Corporation and South Korea's Kalink Co, among others, own stakes in the company. Steel Strips, about 30 percent owned by promoter Dheeraj Garg, recently opened a truck wheel rim unit in Chennai. It bagged orders for 1.25 lakh truck wheels worth 3.9 million euros in November, according to its stock exchange filings.

The company plans to start a new alloy wheel and commercial wheel plant and expects to clock a turnover of Rs 2,500 crore for the year to March 2019, Mohan Joshi, general manager, commercial, told BloombergQuint over the phone.

For the calendar year, the company has a total order book of 1.5 crore rims and has already delivered 1.1 crore in the first nine months, Joshi said. It expects a revenue of Rs 1,800-1,900 crore from the orders.

Steel Strips Wheels should continue to do well as most of the companies in Europe are outsourcing their production, said Avinash Gorakshakar, head of research at Joindre Capital Services. “European companies have strict policy parameters and Steel Strips has done its research and development and that's why they have customers like Volvo. It's not easy to get into that market.”