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Dolat Capital Report
Sterling Tools Ltd. reported better than expected numbers in Q2 FY22. Net revenue grew 43% QoQ to Rs 1.27 billion led by recovery in commercial vehicles volume and price hike.
Ebitda margin stood at 16.8% (225 basis points QoQ), impact of commodity inflation was offset by cost control measures.
We expect margin pressure to ease out in ensuing quarter as raw material prices to be passed on and benefit of operating leverage to kick in.
Long-term relationships with top original equipment manufacturers, we expect Sterling Tools to emerge as the key beneficiary of revival in automotive volume of OEMs.
Moreover, reduction in Import volume and localisation push to propel revenue growth.
Sterling Tool's addition of Hyundai to its new customer list will lead to incremental revenues from FY23.
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