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Steel Strips Wheels may see 22% Rise

opinionSteel Strips Wheels may see 22% Rise

Steel Strips Wheels Ltd is engaged in the manufacturing of steel wheel rims catering to different segments of the automobile industry. Its products include steel and alloy wheels used by two and three wheelers, tractors, high speed trailers, passenger cars and trucks. It offers a broad range of wheels which can be modified as per application and needs of the customers. Steel Strips Wheels has three production facilities located in Punjab, Chennai and Jamshedpur. The company produces passenger car wheels at Dhappar in Punjab and Oragadam in Chennai and truck wheels in Jamshedpur in Jharkhand. It supplies steel wheels to the world’s top names in the original equipment manufacturer area, catering to the auto parts and equipment industry. It has taken a balanced view in the commercial vehicle wheel segment, with two new plants starting production during the current year. The Indian passenger car market is huge with a potential revenue close to Rs 3,000 crore during the next few years and this will make the company take advantage of the potential growth and traditional shift in the wheel industry. Since a lot of international manufacturers are making India a manufacturing hub, Steel Strips Wheels expects the Indian export competitiveness to improve considerably in the future.

The acceleration of structural reforms, move towards a rule based policy framework and low commodity prices have provided a strong economic growth impetus. Even the foreign investments have improved due to recent deregulation measures and efforts to improve the ease of doing business. The auto sector has done well in the last decade, with new product launches keeping the customers, technology and brand in mind. GST implementation has the potential to generate huge employment opportunity and multi layered growth, bringing in productivity led gains for the country. Analysts expect the auto industry to consolidate further with increase in volume growth backed by decline in fuel prices, pick-up in economic activities, thrust in infrastructure investment, low inflation and interest costs. All these factors are positive for Steel Strips Wheels and should drive domestic passenger vehicle and commercial vehicle volume growth sales to grow CAGR of 14% and 20% respectively over the next three years. Despite demonetisation, the country’s exports grew at a fast pace during FY2016-17 to achieve volume sales of $274 billion. There is a strong possibility that the exports may reach $330 billion in the next 18 months.

The Steel Strips Wheels management has recently released a volume guidance for the Q4FY2017-18. It is expecting the highest ever quarterly volume growth with a confirmed wheel order book of 40 lakhs, thereby registering an 11% growth. Similarly, the order book for the truck segment is rising rapidly, with new products portfolio and a larger imprint in the export market. The next financial year also looks extremely bright for the truck segment, with the addition of the new Chennai truck plant adding huge capacity to cater to the rising global truck wheel demand. The stock, currently quoting at Rs 1,025, can be bought for a six-months’ investment view, for a 22% price appreciation.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.

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