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Steel Strips Wheels Limited — Credit Ratings, 02-01-2025: Credit Rating- Revision
Steel Strips Wheels Ltd (SSWL) has reported consolidated revenue of ₹4,357.1 crore for FY24, marking a growth of 5.4% year-over-year from ₹4,040.5 crore in FY23. This growth is driven by a recovery in domestic auto demand and successful customer acquisition strategies, despite pressures from softened raw material prices impacting price realizations.
Net profit stood at ₹465 crore, reflecting a year-over-year increase from ₹442.8 crore, with earnings per share (EPS) calculated at approximately ₹31.5 per share. The profit increase can be attributed to stable operational efficiencies, although operational costs saw a slight uptick due to expanded hiring and R&D investments.
Operational costs rose by about 4.8% during the period, primarily due to higher staffing expenses at the newly expanded alloy wheel division, alongside increased R&D spending to boost product quality. Despite this, the EBITDA margin dropped to 10.6% from 11.0% in FY23, influenced by these cost increases as well as the lag in passing on raw material costs to customers.
On the balance sheet, total debt was reported at ₹926.2 crore, highlighting an adjusted net leverage of 3.1x, deteriorated from 2.3x in FY23. While operational cash flow turned negative at ₹293.8 crore in FY24, it has shown signs of recovery in the first half of FY25.
Strategically, SSWL's focus on ramping up capacities in alloy and steel wheels, particularly with the recent acquisition of AMW Auto Component, positions the company favorably in terms of market share expansion and enhanced profitability from higher-margin products. Market sentiment remains cautiously optimistic with projected revenue growth of 5%-6% for FY25 as expansion initiatives begin to yield returns.
For investors, considering SSWL's solid market positioning coupled with the potential for increased revenue streams, a hold stance seems appropriate, balancing the positive growth drivers against the current elevation in operational costs and debt levels.