Stocks to Buy Today: On 25 September 2023, the financial services firm Axis Securities published the latest research report on Steel Strips Wheels shares, assigning a ‘buy’ rating to the stock. The comprehensive analysis also provides valuable insights into the company’s financial health.
Axis Securities is Bullish on Steel Strips Wheels and has recommended a ‘buy’ rating on the stock with a target price of Rs 325. Let’s take a closer look at their recommendations for the Steel Strips Wheels share price target set by Axis Securities.
Axis Securities has recently released a research report on Steel Strips Wheels Limited (SSWL), a leading player in the automotive wheels segment, both in steel and alloy categories. As of 22nd September 2023, the Current Market Price (CMP) stood at Rs 265.
Headquartered in Chandigarh, SSWL has its manufacturing facilities strategically located across the country in Dappar (Punjab), Oragadam (Chennai), Jamshedpur (Jharkhand), Mehsana (Gujarat), and Saraikela (Jharkhand).
These plants together boast a combined manufacturing capacity of around 23 million units. The company also has a pending acquisition of AMW Autocomponent, which is expected to add approximately 7 million steel wheel capacities in the future.
Financially, the company has shown a substantial shift in its revenue composition. In the financial year (FY) 2023, steel wheels contributed around 69% of the total revenue, a significant drop from 97% in FY19. Conversely, alloy wheels’ contribution rose to 31% in FY23, up from a mere 3% in FY19. The total revenue for FY23 was Rs 4,041 crore, almost double from Rs 2,041 crore in FY19.
Axis Securities forecasts total wheel volumes at 19.5 million and 20.5 million units for FY24 and FY25, respectively. The projection is moderated against earlier estimates due to a slower ramp-up of the AMW plant. In terms of financial performance, the report estimates the EBITDA and PAT to grow at a Compounded Annual Growth Rate (CAGR) of 11% and 17%, respectively, over FY23.
The valuation and recommendation section of the report maintains a positive outlook for SSWL. The company aims to tap into the export markets of the US and Europe while diversifying its product portfolio. It is also venturing into the Motor+Controller Electric Vehicle (EV) business through a joint venture with Reddler.
Taking into account these factors, Axis Securities values the stock at a PE multiple of 17x on their September 2025 EPS estimate. The research firm has switched its valuation metric from EV/EBITDA of 5.5x, citing a strengthening balance sheet and lower net debt levels for the company.
Company Details
| CMP as of 22nd Sep, 2022 | 265 |
| Upside / (Downside (%)) | 22% |
| High / Low (Rs) | 289 / 126 |
| Market Cap (Cr) | 4143.69 |
| Avg. Daily Vol. (6m) Shrs. | 636,567 |
| No. of Shares (Cr) | 15.65 |
| Financial & Valuation | FY24E | FY25E |
|---|---|---|
| Revenue (Rs Cr) | 4,360 | 4,814 |
| Net Profit (Rs Cr) | 464 | 530 |
| EPS (Rs) | 220 | 275 |
| P/E Ratio (x) | 14.0 | 17.6 |
| P/B Ratio (x) | 18.9 | 15.1 |
| EV/EBITDA (x) | 9.3 | 8.2 |
| Dividend Yield (%) | 3.1 | 2.6 |
| ROE (%) | 17.7 | 18.6 |
| Shareholding | Mar-23 | Jun-23 |
|---|---|---|
| Promoters | 62.68 | 62.68 |
| Foreign Institutions | 5.63 | 5.63 |
| Mutual Funds / UTI | 0.21 | 0.21 |
| Fin Inst. / Banks | 0.01 | 0.01 |
| Public and Others | 31.47 | 31.47 |
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