Ashika Monthly Insight Flip July 2016

FDI - WINDOW OF OPPORTUNITY
Steel Strips Wheels Ltd.
CMP: Rs 456
Rating: BUY Target: Rs 578
Company Information
BSE Code 513262
NSE Code
SSWL
Bloomberg Code
SSW
ISIN
INE802C01017
Market Cap (Rs. Cr) 697
Outstanding shares(Cr) 1.5
52-wk Hi/Lo (Rs.) 467.7 / 272
Avg. daily volume (1yr. on NSE) 30,651
Face Value(Rs.) 10
Book Value (Rs) 271.3
180
160
140
120
100
80
60
40
20
0
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Share holding pattern as on Mar 2016 (%)
Particulars (in Rs. Cr.) FY15 FY16 FY17E FY18E
Net Sales 1,152.7 1,181.9 1,329.6 1,500.9
Growth (%) 8.4% 2.5% 12.5% 12.9%
EBITDA 107.6 145.3 163.5 193.6
EBITDA Margin (%) 9.3% 12.3% 12.3% 12.9%
Net profit 39.4 61.2 70.5 84.0
Net Profit Margin (%) 3.4% 5.2% 5.30% 5.60%
EPS (Rs) 25.9 40.1 46.2 55.1
Source: Ashika Research & Capitaline
SSWL vs. Nifty
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Volume('000)RHS SSWL Nifty
Others
40.3
FII
0.2
DII
0.4
Promoters
59.2
500
450
400
350
300
250
200
150
100
50
0
Company overview
Steel Strips Wheels ltd. (SSWL) is a Chandigarh based
company, engaged in designing, manufacturing and
marketing of Steel Wheel Rims for Passenger cars, Utility
vehicles, 2/ 3 wheelers, Tractors, Light/ Heavy commercial
vehicles and OTRs (over the roads). Company has
manufacturing capacity of 16.6 million units and
manufacturing plants are strategically located at Punjab
(Dappar), Tamil Nadu (Oragadam, Chennai) and Jharkhand
(Jamshedpur). Some strategic investors invest in SSWL
including Tata Steel Ltd, India with 8.26% stake followed
by Sumitomo Metal Industries, Japan 5.59%, GS Global,
South Korea 2.48% and Kalink, South Korea- 1.30%.
Investment Rationale
Healthy market share in steel wheel segment
SSWL holds strong market share in domestic steel wheel
market with 50% share in passenger car segment, 40% in
commercial vehicle, 38% in tractor and 70% in OTR. In
total sales volume of 13.17 million units during FY16,
passenger car segment accounts 61.6% of volume
followed by two/three wheeler 21.6%, tractor 6.5% and
truck/OTR 10.2%. Thus, passenger car segment is the
largest contributor of sales volume and company holds
healthy market share in the segment. Further, the
expectation is that the sales of passenger car would get
traction from good monsoon across the country and will be
benefited from seventh pay commission. Gradual pick up
in industrial activities would also lead to higher
commercial vehicle sales which had shown muted growth
in last few years amid slowdown in domestic economic
activities. During FY16, company had posted 6% volume
growth as compared with FY15, though the volume growth
was robust during Q4FY16 (up by 11% yoy), owing to
higher export order and strong momentum in auto sales
led by higher commercial vehicle & tractor sales. Steady
growth in auto sector on the backdrop of above normal
monsoon, rising disposable income, benefits of seventh
pay commission and industrial activities pick up would
drive the growth for SSWL.
Expansion to boost growth
To boost growth, company has always done expansion.
During 2010, SSWL has total installed capacity of 10
million wheels, which company has increased to 16.6
million and has planned to expand it further. In order to
enter into growing alloy wheel market, SSWL has planned
to set up manufacturing unit in Gujarat for an investment
of USD 50 million. Company has tied up with Korea based
alloy wheel company Kalink to set up an alloy wheel plant
15