Buy Steel Strips Wheels, target price Rs 2150: Axis Securities

Axis Securities has buy call on Steel Strips Wheels with a target price of Rs 2150. The current market price of Steel Strips Wheels Ltd. is Rs 1819.6. Time period given by analyst is one year when Steel Strips Wheels Ltd. price can reach defined target.
Steel Strips Wheels Ltd., incorporated in the year 1985, is a Small Cap company (having a market cap of Rs 2848.73 Crore) operating in Auto Ancillaries sector.

Steel Strips Wheels Ltd. key Products/Revenue Segments include Wheel Rims, Duty Drawback, Job Work for the year ending 31-Mar-2020.


Financials
For the quarter ended 30-09-2021, the company reported a Standalone Total Income of Rs 961.63 Crore, up 41.33 % from last quarter Total Income of Rs 680.40 Crore and up 134.59 % from last year same quarter Total Income of Rs 409.91 Crore. Company reported net profit after tax of Rs 62.80 Crore in latest quarter.

Investment Rationale
Being in an oligopoly market, SSWL commands leadership with a ~55% market share in the steel wheel rims and a similar market share in alloywheels as well. The brokerage expects SSWL to outperform the industry growth givenits sticky relations with OEMs across all the auto segments viz. 2/3W, PV, CV, and Tractors. It expects the company to report Revenue/EBIDTA/PAT CAGR of 21%/49%/254% over FY21-23E respectively vis-à-vis 8%/10%/9% CAGR for FY13-21. The higher growth estimates are on account of operating leverage kicking in backed by higher capacity utilization in light of the domestic auto-recovery and improving exports. It retains a BUY rating on the stock and increases multiple considering a strong business outlook led by PVs, alloy wheels, exports and CVs. It values the stock at 6.5x FY23E EV/EBIDTA to arrive at a target price of Rs 2,150/share, implying an upside of 19% from CMP.

Promoter/FII Holdings
Promoters held 62.77 per cent stake in the company as of 30-Sep-2021, while FIIs owned 0.26 per cent, DIIs 0.31 per cent.