Steel Strips Wheels Ltd. (SSWL), is an auto ancillary company involved in designing and manufacturing

Steel Strips Wheels Ltd. (SSWL), is an auto ancillary company involved in designing and manufacturing of automotive wheels - both steel and alloy wheels. It currently has five plants in India with total production capacity of ~2.4 crore wheels per annum, including ~0.36 crore of alloy wheels. As of FY24, it realised 28% of its sales from Alloy wheels while Steel wheels constituted the rest 72% of sales.
SSWL counts all major domestic OEMs as its clients across vehicle categories namely CV, PV, 2-W, Tractors, etc.
SSWL operates in an oligopolist industry structure and is a sound proxy of underlying volume growth in the domestic auto space as well as greater export play amidst China+1 trend. Demand prospects are steady in the steel wheel business while robust in the alloy wheel segment amid increasing penetration of SUVs and premiumisation trend underway in PV space.
SSWL is presently executing a brownfield expansion in the alloy wheel space which will augment its capacity from 36 lakh units per annum to 48 lakh units per annum with full ramp up of the same expected in 2-3 years. It has in the recent past also acquired AACL from NCLT, having steel wheel capacity of ~70 lakh units. Thus, total installed capacity at SSWL is set to increase from ~2.4 crore units to ~3.2 crore units by FY25E.
Going forward sensing steady demand prospects in steel wheel segment, greater exports thrust and premiumisation play in alloy wheel space we have built in sales volume CAGR of 7% over FY24- 26E. Also supporting topline growth at the company is venturing into new segments such as Aluminium knuckles. Management in the recent Concall also shared its vision for US$ 1 billion sales by FY30E.
SSWL is a capital efficient company realising ~11% EBITDA margins and ~14- 17% return ratios profile. On the debt side amidst brownfield expansion in alloy wheels, knuckles and AACL acquisition its current gross debt has increased to ~₹1,050 crore as of FY24 end. With peak capex behind us, debt is expected to retire at SSWL with gross debt expected at ~₹ 780 crore by FY26E.
We have a positive view on SSWL amid powertrain agnostic product profile (no EV risk), healthy volume growth visibility, increasing share of exports & alloy wheel in overall sales mix, consequent rise in margins & return rations. We also drive comfort from its inexpensive valuations (~12x PE, ~7x EV/EBITDA on FY26E) and healthy b/s (0.4x debt: equity: FY26)
We have a BUY rating on SSWL with target price of ₹ 330 wherein we have valued the company at 18x PE on FY26E.