Steel Strips Wheels Limited
Steel Strips Wheels Limited
Initiating Coverage
Steel Strips Wheels Ltd. BUY Snapshot
Recommendation
Rs. 133 Steel Strips Wheels (SSWL), a part of the multifaceted Steel Strips
CMP (31/05/2010)
Auto Ancillary group, is engaged in manufacturing wheel rims for Cars, LCV, CV’s &
Sector
Stock Details
513262
BSE Code
SSWL
NSE Code Bloomberg Code
SSW IN
Market Cap (Rs. cr)
180.88 45%
Free Float (%)
Investment Rationale
•
161.9/45.45
52‐ wk HI/Lo
9,686
Avg. volume BSE (Monthly) Face Value
Rs.10
Dividend payout (FY 2009/08)
‐/16% 1.36 •
Shares o/s (Crs) Relative Performance
1Mth
3Mth
1Yr
SSWL
‐7.6%
36.2%
Sensex
‐3.0%
2.6%
160 140 120 100 80 60 40 May‐09
tractors. SSWL started commercial production from 1991. The company is armed with the latest know‐how, manufacturing automobile wheel rims at its state‐of‐the‐art manufacturing unit at Chandigarh, Chennai & Jamshedpur.
97.6% 15.3% •
• SSWL Aug‐09
Nov‐09
Mar‐10
Aggressive capacity expansion plans: SSWL had consistently gained market share from its competitors with competitive advantage. Further capacity expansion from 10 mn wheels to 15 mn wheels over next couple of years will provide significant growth opportunities to the company. Strong order book: SSWL has an order book of 10.4 mn wheels worth Rs.780 Crs to be executed in FY 2011. This provides near term revenues visibility. Increasing exports to boost revenues: Apart from domestic customers, the company is increasing its focus on international players. Recent product approvals and order pipeline will drive the export growth at a rapid pace. Change in product mix to enable margin expansion: Sales of high margin products like trucks and tractors wheels through Jamshedpur and Dappar plant will increase the operating margin of the company.
Valuation & Recommendation
Shareholding Pattern as of 31/03/2010
We believe that SSWL’s net sales will grow at a CAGR of 41.4% over a next two years whereas net profit is expected to grow at a higher Institutional (Incl. FII) 5.01% CAGR of 76.7% during the same period, on account of increase in Corporate Bodies 27.90% sales of high margin products. We expect the company to earn an EPS Public & others 15.06% of Rs. 20.91 in FY 2011 and Rs. 31.71 in FY 2012. At the CMP of Rs. 133 Sunil Jain ‐ V.P Equity Research (+91 22 3027‐2211) per share, SSWL is currently trading at a PE of 6.36x FY11E and 4.19x [email protected] FY12E EPS and looks very attractive. Based on our EPS of Rs. 20.92 for Ashish Khetan – Research Analyst (+91 22 3027‐2259) [email protected] FY 2011 and a target multiple of 12.0x we arrive at target of Rs. 250. Aditya Powani – Research Associate (+91 22 3027‐2241) Consequently, we recommend a BUY rating on the stock with a target [email protected] price of Rs. 250, indicating a potential upside of 88%. Promoters Holding
52.03%
Net Sales (RS. Crs)
Growth %
EBITDA (Rs. Crs)
Margin %
PAT (Rs. Crs)
Margin %
EPS (Rs.)
FY 2009 FY 2010 FY 2011E
317.3 418.5 660.5
18.4% 31.9% 57.8%
45.1 60.8 101.1
14.2% 14.5% 15.3%
7.8 14.3 29.6
2.5% 3.4% 4.5%
5.71 10.50 20.92
23.31 12.67 6.36
1.02 0.95 0.86
FY 2012E
837.1
26.7%
130.0
15.5%
44.8
5.4%
31.71
4.19
0.72
Year
P/E (x)
P/BV (x)
Initiating Coverage
Steel Strips Wheels Ltd. Business Overview Steel Strips Wheels ( SSWL) a part of the Steel Strips group is a recognized player in the development and production of steel wheel rims for Original Equipment Manufacturers SSWL’s product range comprises wheels rims for Passenger cars, Multi utility vehicles, Tractors, Trucks, OTR Vehicles as well as Two Wheelers. SSWL currently has two production facilities with a total capacity of 10 million wheels p.a. The company’s facilities are located in Dappar (near Chandigarh) and Oragadam (near Chennai). SSWL’s third facility, which is designed to produce only truck wheels, is currently being set up in Jamshedpur and will be commissioned in 2010. It will dispose of an initial capacity of 1 million wheels. Over the years company has expanded its client base and currently caters to all major Indian automakers.
Dappar, Punjab (Operational)
Capacity: 7.5 million Car /MUV/ Tractors/ Truck wheels
Steel Strips Wheels Limited Chennai, Tamil Nadu (Operational) Capacity: 2.5 million Car wheels
Jamshedpur, Jharkhand (Exp. to start in July 2010) Capacity: 1million Trucks
Dappar Plant (Punjab) SSWL’s mother plant is located at Dappar (in Punjab) having an annual capacity of 7.5 million wheels. The company manufactures wheels for Cars, Tractors, and Trucks from the plant. The company currently has 5 Rim Wheel manufacturing machines at this plant. On an average daily 15000 wheels are being manufactured and transported to Maruti Suzuki Ltd from this plant. The company plans to expand the capacity by 0.5 mn to 8 mn wheels during the current year. The table below provides a break‐up of capacity Segment Cars Tractors Trucks Others Total Capacity (Mn) 5.8 1.2 0.4 0.1 7.5
Initiating Coverage
Steel Strips Wheels Ltd. Chennai, Tamil Nadu The Chennai plant is having an annual capacity of 2.5 million which can manufacture only car wheels. Currently, the company supplies car wheels to many auto majors from this plant including Maruti and Renualt. SSWL has is planning to expand this facility to 5 million wheels by Feb 2011.
Jamshedpur, Jharkhand SSWL has established a new facility at Jamshedpur, Jharkhand at a cost of around Rs. 140 Crs. The company’s newest facility is currently undergoing a Dry run & commercial production is expected to begin from the month of July. The Jamshedpur plant is located close to the Tata Motors plant and has an annual capacity of 1 million Truck wheels. SSWL has already contracted Tata Motors to sell majority of its capacity. The company plans to sell 0.4 mn wheels from this plant in FY 2011 which is expected to contribute approximately Rs. 110 Crs to the company’s top‐line. SSWL plans to increase the capacity to 2 mn wheels by June 2011.
Investment Rationale Capacity expansion to provide significant growth SSWL’s Jamshedpur plant having an annual capacity of 1 Million wheel rims per annum is expected to commence production from July 2010. The company expects to primarily meet the requirements of Tata Motors through this plant. The company further plans to increase the capacity to 2 million wheel rims by June 2011. At the same time company is planning to expand its Chennai capacity by 2.5 million taking the total capacity to 5 million by Feb 2011. While company has already started a small capacity expansion plan in its Dappar plant where it intends to add 0.5 mn capacity. Once all these capacity addition plans are completed over next 12‐15 months, company will have an annual capacity of 15 mn wheel rims. These capacity additions will provide significant growth opportunities to the company. SSWL plant at Jamshedpur solely for heavy vehicles is expected to boost the revenue further from this segment. SSWL plans to sell 0.4 mn wheels from this plant in FY 2011 which is expected to contribute approximately Rs. 110 Crs to the company’s top‐line & around Rs 170 Crs for FY 2012. Further, the company has laid out an aggressive expansion plan to set up a 5 million wheel facility in Morocco in 2012. SSWL plans to set up a plant at Morocco as it has been selected as Renault’s sole wheel rim supplier for its Green field plant in Morocco which is expected to begin in 2012. Moreover, the plants proximity to Spain would help reduce the logistics cost as SSWL is a key supplier to auto majors like Volkswagen, Nissan & PSA.
Initiating Coverage
Steel Strips Wheels Ltd. Strong Customer Base to ensure steady revenues Over the years SSWL has build a large customer base. Today it has almost all major Indian auto players as its customers. Moreover, company has also served a few large global manufacturers. The company has maintained a strong relationship with its clients which will enable the company to boost it top‐line growth going forward. The following table provides a snapshot of company’s client base. Cars Tractors Trucks OTR vehicles Maruti Suzuki Honda Seil Cars Tata Motors Nissan General Motors
Mahindra & Mahindra Punjab Tractors International Tractors Eicher Tractors Escorts
Swaraj Mazda Tata Motors Ashok Leyland
JCB L&T
SSWL’s export currently stand at around 10% and is a major supplier to global majors like Renault & Peugeot in the Cars segment, PIAGGIO in the scooter segment & the Kubota group (Thailand) in the tractor segment. SSWL’S current Market share stands at 47% in the Cars segment, 80% in the MUV segment, 31% in the Tractor segment and 4% in the Trucks segment. Customer‐wise revenues break‐up (FY 2010)
The company currently generates 32% of its total revenues from Maruti and meets around 70% of the Maruti’s total wheel requirement in India. Going forward increasing volumes from Maruti will provide strong growth opportunities to the company.
Initiating Coverage
Steel Strips Wheels Ltd. Strong order book for FY 2011 The Company has a very strong order book of around 10.4 million wheels. The current size is equivalent to 100% of the installed capacity (including 0.4 million addition from the Jamshedpur plant for the year). In terms of value the order book size stands at Rs. 780 Crs which is entirely executable in FY 2011. The company expects to generate around Rs. 110 Crs from its new plant in FY 2011 while it will generate Rs. 240 Crs from this plant once it gets fully operational in FY 2013. Company has recently bagged orders from BMW, Renualt, and Tata Motors which will help company to operate at full capacity in 2011. The company currently has around 40 new products in the pipeline for 12 customers including New Holland, Volkswagen and Renault. Going forward, we expect the orders inflow to continue and provide long term revenues visibility. Robust growth in exports
We have seen SSWL secure orders from global auto majors like BMW & Renault over the last couple of months. In January the company bagged an order for the supply of spare wheels for the BMW MINI project in UK (around 48,000 wheel rims per annum). SSWL bagged several orders from Renault including supply of steel wheel rims for its green filed plant at Morocco. Moreover, company has strong tie‐ up with Kromag (Europe) and Kubota group (Thailand) which will boost the exports growth. SSWL recently bagged an additional order for over 30,000 wheels from Kromag. SSWL is targeting a growth in exports of around 135% for FY 2011. Company’s export sales stood at around Rs. 45 Crs in FY 2010 (10% of total sales). We believe that increasing opportunities in global market will enable the company to grow at a faster pace. Change in product mix to boost margins The company’s product mix will change rapidly once its Jamshedpur plant becomes operational. The sale of higher margin product i.e. trucks wheels from Jamshedpur will enable the company to improve its overall EBITDA margins. In truck and tractor wheels company enjoy an EBITDA margin of 18‐19% while in cars company gets an EBITDA margin of 15‐16%. Even the close proximity of its new plant to Tata Motors will enable the company to save on logistics. Considering these factors we expect the company’s EBITDA margin to increase in next couple of years.
Risk Factors Delay in completion of new plant Dry run of the Jamshedpur plant is currently on and is expected to start from the month of July. Any delay could result in lowering revenue estimates as revenues from Jamshedpur plan is expected to add 12% to the top‐line in FY 2011. Further, any delay in the capacity additions at Chennai and Dappar plan would lead to a deviation from our estimates.
Initiating Coverage
Steel Strips Wheels Ltd.
Cancellation of order owing to current crisis in the Europe SSWL derives a major percentage of its Export revenues from the European markets catering to auto majors like Renault, PIAGGIO, Peugeot Citroen and BMW. Furthermore, majority of its export growth is expected to come from Europe. Uncertainty over the sovereign debt crisis deepening in the region could have an impact on automobile sales softening in the region, which in turn could result in a slowdown for demand for auto components including wheels. Moreover, the company faces a risk of the cancellation of current orders from its prestigious customers in case of severe crisis and slowdown in the Europe.
Industry Analysis India is fast emerging as a global automobile giant with both automobile and auto component sectors witnessing impressive growth from the past few of years barring FY 2009. The automotive industry has emerged as one of the prominent manufacturing sectors of the Indian economy, contributing as much as 4% to the total GDP. Going forward, the auto industry is expected to grow at 14% in FY 2011. Growth of the automobiles industry Domestic players in the automotive OEMs are adding capacities to meet future demand, driven by both buoyant domestic market and growing vehicle export market, particularly for small cars, two wheelers and light commercial vehicles. New Global players are also entering the market and setting up huge capacities which will increase the breadth of the domestic market and boost vehicle exports from India. Passenger car segment‐on fast lane In the Passenger car segment, the growth is mainly led by the growing middle class and the higher disposable income for them. New entrants in the market like Renault, Volkswagen and BMW will aid in increasing the depth of the passenger car market and further the story of India as a large automotive market and an alternative low‐cost manufacturing base. The exports in this sector are primarily led by players like Hyundai and Maruti. Commercial vehicle market: Fundamentals positive The commercial vehicle segment has grown over the past three years largely on account of the regulatory changes and favorable macroeconomic fundamentals. We believe the demand for commercial vehicles will grow at an average of 9‐10% p.a. over the long term; driven by the robust industrial sector and the infrastructure build out. Big International players like Volvo, MAN Force Motors have also set up shop in India. This move signals their confidence in the robust growth outlook for the Indian CV market over the medium to long term, even though their initial capacities are not substantial.
Initiating Coverage
Category Passenger Vehicles CV 3‐Wheelers 2‐Wheelers Total
Category Passenger Vehicles CV 3‐Wheelers 2‐Wheelers Total
Steel Strips Wheels Ltd. Domestic Sales Trends 2004 2005 2006 902,096 1,061,572 1,143,076 260,114 318,430 351,041 284,078 307,862 359,920 5,364,249 6,209,765 7,052,391 6,810,537
2007
2008
2009
2010
CAGR(%)
1,379,979 1,549,882
1,552,703
1,949,776
13.7%
467,765 490,494
384,194
531,395
12.6%
403,910 364,781
349,727 7,437,619
440,368 9,371,231
7.6%
7,897,629 8,906,428 10,123,988 9,654,435 9,724,243 12,292,770
10.3%
Automobile Export Trends: 2004 2005 2006 129,291 166,402 175,572 17,432 29,940 40,600 68,144 66,795 76,881 265,052 366,407 513,169 479,919 629,544 806,222
7,872,334 7,249,278
2007
2008
2009
2010
9.7%
CAGR(%)
198,452 218,401
335,729 446,146
49,537 58,994
42,625 45,007
17.1%
143,896 141,225
148,066 173,282 1,004,174 1,140,184
16.8%
1,011,529 1,238,333 1,530,594 1,804,619
24.7%
619,644 819,713
22.9%
27.5%
Source: SIAM, Nirmal Bang Research
Automotive Components Industry Demand Co‐relation The auto components industry has largely mirrored the growth trend witnessed in automobile production. We saw a flat growth of just of 0.7% in domestic automotive sales at 9.72 million units in 2009 which increased by 26.4% to 12.29 million units in 2010. On an overall basis the total sales grew 25.3% from 11.2 million units to 14.09 million units in 2010. Rising competition, increasing cost pressures led the global players to outsource certain portion of components to low cost countries which in result offers immense outsourcing opportunities to Indian auto component manufacturers. Moreover, India provides trained manpower at competitive costs making India a favored global manufacturing hub. The attractiveness of the Indian markets on one hand and the stagnation of the auto sector in markets such as Europe, US and Japan on the other have resulted in shifting of new capacities and flow of capital to the Indian automobile industry. We believe auto component exports from India are set to grow at 25‐30% CAGR for the next 5 years, given the buoyant growth in the auto segment accompanied by expansions undertaken by majority of component manufacturers.
Initiating Coverage
Steel Strips Wheels Ltd.
Reasons for buoyant growth in the automotive components sector India Center for Skill Based Mfg and Engineering Increasing India Global Distressed Suppliers Compact Car Hub in US Europe Auto Growth in Increased Emerging Markets Components Sourcing from LCC Opportunity for Large Scale Auto Component Manufacturing in India Source: ACMA, Nirmal Bang Research
Component outsourcing Of the total global auto components trade of US$ 185 billion, India's share is estimated at 0.4%. The ACMA‐McKinsey Vision 2015 document estimates the potential for the Indian auto component industry to be US$ 40‐45 billion by 2015. Of this, 50% is expected to come from exports.
Source: ACMA, BS, Nirmal Bang Research
Initiating Coverage
Steel Strips Wheels Ltd. India is estimated to have the potential to become one of the top five auto component economies by 2025with the investments growing at a CAGR of 13.5% from 2009‐2016. The industry has been experiencing a high growth rate of 20% over the period 2004‐09 and is expected to grow at a rate of 13% over the period 2009‐16. Similarly, while growth rate of exports has been 21.2% during 2004‐09, the growth rate is expected to grow by 30.9% during 2009‐14. Considering the growth opportunity on offer in the industry and the SSWL’s expansion plan we believe that company can witness significant growth and increase its market share.
Peer Comparison We believe that Wheels India is the best comparable company as both the companies involved in the production of automotive wheel rims. During the current year the company has outperformed Wheels India in terms of growth & margins. SSWL has recorded EBITDA margin of 14.5% for FY 2010 while Wheels India has just managed 7.3% EBITDA margin for the same period. The top‐line growth of Wheels India has witnessed a moderate growth of 10.0% during FY10 while SSWL has witnessed a growth of 31.9% during the same period.
Company
Price
SSWL
135
Wheels IN
288
Eps
PE
EBIDTA
Margin
10.98
12.3
Mcap 176.4
Sales 418.46
60.50
14.5%
PAT 14.35
Margin 3.4%
13.12
22.0
284.2
1241.38
91.16
7.3%
12.95
1.0%
Initiating Coverage
Steel Strips Wheels Ltd. Valuation & Recommendation
We believe that SSWL’s net sales will grow at a CAGR of 41.4% over a next two years whereas net profit is expected to grow at a higher CAGR of 76.7% during the same period, on account of increase in sales of high margin products. We expect the company to earn an EPS of Rs. 20.91 in FY 2011 and Rs. 31.71 in FY 2012. At the CMP of Rs. 133 per share, SSWL is currently trading at a PE of 6.36x FY11E and 4.19x FY12E EPS and looks very attractive. The company has historically traded at a PE multiple of more than 12 (as shown in the PE Band below) except when market conditions were bad. Therefore, we believe that SSWL should be valued on a PE multiple of 12.0x. Based on our EPS of Rs. 20.92 for FY 2011 and a target multiple of 12.0x we arrive at target of Rs. 250. Consequently, we recommend a BUY rating on the stock with a target price of Rs. 250, indicating a potential upside of 88%.
PE Band
Initiating Coverage
Steel Strips Wheels Ltd.
Q4 FY10 Results •
•
•
SSWL reported revenues grew 7.1% Q‐Q to Rs. 123.8 Crs in Q4 FY10 primarily driven by increase in volumes. On a Y‐Y basis, revenues saw a jump of 69% on back of growth of the automobile sales. The Company reported EBIDTA of Rs 17.9 Crs in Q4 FY10 as compared to Rs 14.2 Crs in Q3 10 due to an increase in sales & lower Raw material costs. Raw material accounted for 62% of total costs compared to 67% in Q310. SSWL reported a net profit of Rs. 5.5 Crs in Q4 FY10 as compared to Rs 2.3 Crs in Q3 FY10 (+140.2% QoQ). On a Y‐Y basis we saw the profit increasing from Rs. 0.3 Crs to Rs. 5.5 Crs.
Income Statement (in crores RS.) Pa rti cul a rs
Q4 FY10
Q3 FY10
Q‐o‐Q
Q4 FY09
Y‐o‐Y
Gros s Sa l es
134.5
124.5
8.0%
80.2
67.6%
Net Sa l es
123.8
115.6
7.1%
73.3
69.0%
Increa s e/Decrea s e i n s tock
0.7
(2.5)
n/a
0.7
‐4.1%
Ra w Ma teri a l s
76.6
78.0
‐1.8%
43.3
77.1%
Empl oyee Cos t
6.0
5.9
1.5%
3.1
91.6%
Expendi ture
Other expendi ture
22.7
20.1
12.9%
14.7
53.7%
Tota l Expendi ture
105.9
101.5
4.4%
61.9
71.3%
EBITDA
17.9
14.2
25.9%
11.4
56.4%
Ma rgi n
14.4%
12.3%
216 bps
15.6%
(116) bps
Interes t
3.9
3.8
2.1%
4.2
‐6.5%
Depreci a ti on
6.8
6.8
0.3%
4.8
41.6%
Other i ncome
0.5
0.1
642.9%
(0.3)
‐257.6%
Ca pi ta l Is s ue expens es w/off
0.0
0.1
‐100.0%
0.0
n/a
Les s :(Pri or peri od a djus tment)
0.3
0.0
1350.0%
0.4
‐29.3%
Profi t Before Ta x
7.4
3.5
108.2%
1.7
337.5%
Provi s i on for Ta x (Incl udi n deffered ta
1.9
1.2
49.2%
1.4
37.0%
Net Profi t
5.5
2.3
140.2%
0.3
1566.7%
Adjus ted Net Profi t
5.5
2.3
140.2%
0.3
1566.7%
Ma rgi n
4.4%
2.0%
246 bps
0.5%
399 bps
Ea ri ngs per s ha re (Rs )
4.2
1.8
140.2%
0.2
1641.5%
Initiating Coverage
Steel Strips Wheels Ltd.
Financial Statements Income Statement (in crores RS.) 2008
2009
2010
2011E
2012E
Gros s Sa l es
302.0
357.8
451.8
733.9
930.1
Net s a l es
260.8
317.3
418.5
660.5
837.1
‐0.7
‐2.2
‐2.4
0.0
0.0
Ra w Ma teri a l s
162.1
212.2
265.7
422.0
537.2
Increa s e/Decrea s e i n s tock Empl oyee Cos t
10.2
12.9
20.9
31.7
39.3
Sel l i ng ,Admi ni s tra ti on & other Expens es
40.6
49.3
73.5
105.7
130.6
Total Expenditure
212.2
272.2
357.6
559.3
707.1
EBITDA
48.6
45.1
60.8
101.1
130.0
Ma rgi n (on net s a l es )
18.6%
14.2%
14.5%
15.3%
15.5%
Interes t
11.9
16.0
16.9
26.2
27.7
Depreci a ti on
14.4
17.1
25.0
31.1
35.4
Other i ncome
1.1
1.1
0.9
1.0
1.0
Les s :(Pri or peri od a djus tment)
0.0
0.2
0.3
0.0
0.0
Ca pi ta l Is s ue expens es w/off
0.1
0.1
0.1
0.1
0.0
Profi t Before Ta x
23.3
12.8
19.5
44.8
67.9
Provi s i on for Ta x (Incl udi n deffered ta x)
6.9
5.0
5.2
15.2
23.1
Net Profi t
16.5
7.8
14.3
29.6
44.8
Adjus ted Net Profi t
16.5
7.8
14.3
29.6
44.8
Ma rgi n (on net s a l es )
6.3%
2.5%
3.4%
4.5%
5.4%
Ea ri ngs per s ha re (Rs )
12.53
5.71
10.50
20.92
31.71
13.1
13.7
13.7
14.1
14.1
Equi ty
Initiating Coverage
Steel Strips Wheels Ltd.
Balance Sheet (in crores) 2008
2009
2010 E
2011 E
2012 E
13.1
13.7
13.7
14.1
14.1
Sources of Funds Shareholders' Equity Reserves
139.2
156.7
168.3
204.6
246.6
Share Holders Funds
152.3
170.4
182.0
218.7
260.7
Secured Loans
169.2
234.8
277.1
305.1
301.6
15.5
0.0
0.0
0.0
0.0
184.7
234.8
277.1
305.1
301.6
12.2
15.4
15.4
15.4
15.4
349.2
420.6
474.5
539.2
577.6
313.0
359.9
406.8
435.7
430.2
Investments
0.2
0.2
0.2
0.2
0.2
Cash
7.6
6.9
9.6
17.8
41.3
Receivables
40.0
43.7
56.2
85.0
107.8
Inventories
40.5
52.8
75.4
104.8
132.9
Loans and Advances
22.4
13.4
12.6
16.5
18.4
Other current assets
2.1
1.6
2.9
4.6
5.9
Unsecured Loans Total Debt Net Deferred Tax Total Liabilities and Equity Application Of Funds Net Fixed Assets (incl WIP)
112.6
118.4
156.7
228.7
306.3
Current Liabilities
Total Curr. Assets and Loans & Adv
72.8
57.5
89.1
125.4
159.1
Provisions
4.0
0.4
0.0
0.0
0.0
Total Curr.Liabs & Prov.
76.8
58.0
89.1
125.4
159.1
Net Current Assets
35.8
60.4
67.6
103.3
147.2
Miscellaneous Expenses not writte
0.1
0.1
0.0
0.0
0.0
349.2
420.6
474.5
539.2
577.6
Total Assets
Initiating Coverage
Steel Strips Wheels Ltd.
Cash Flow Statement (in Rs Crs.) Cash Flow
2008
2009
2010E
2011E
2012E
Profit Before Tax
23.3
12.8
19.5
44.8
67.9
Plus Depreciation
14.4
17.1
25.0
31.1
35.4
Misc expenses w/off
0.1
0.1
0.1
0.0
0.0
Interest received
(0.3)
(0.4)
0.0
0.0
0.0
Interest paid
11.0
14.4
16.9
26.2
27.7
(Increase)/decrease in inventory
(7.3)
(12.3)
(22.7)
(29.3)
(28.2)
(Increase)/decrease in trade & other receivables
(32.3)
5.9
(12.5)
(28.9)
(22.7)
(Increase)/decrease in trade payables
68.4
(15.3)
27.4
31.9
29.6
Others
0.0
0.0
3.3
(1.3)
0.9
Total Tax paid
(2.4)
(3.4)
(5.2)
(15.2)
(23.1)
74.9 (103.0)
18.9 (64.1)
51.7 (71.8)
59.3 (60.0)
87.6 (30.0)
0.3
0.7
0.0
0.0
0.0
(102.7)
(63.3)
(71.8)
(60.0)
(30.0)
Cash Flow from Operations Purchase of Fixed assets and tangibles Net Others Cash Flow from investing (b) Proceeds from issue of equity shares incl premium
21.9
10.0
0.0
0.0
0.0
Proceeds from long term borrowings
20.5
50.2
42.3
37.9
(3.5)
Divedend paid
(1.8)
(2.0)
(2.7)
(2.8)
(2.8)
Interest paid
(11.0)
(14.4)
(16.9)
(26.2)
(27.7)
Others
0.0
0.0
0.0
0.0
0.0
Cash Flow from Financing
29.6
43.8
22.7
8.9
(34.0)
Net Cash Flow
1.8
(0.7)
2.6
8.2
23.5
Beginning Cash Balance (including bank guarantees)
5.8
7.6
6.9
9.6
17.8
Ending Cash Balance
7.6
7.0
9.6
17.8
41.3
Initiating Coverage
Steel Strips Wheels Ltd.
Ratio Analysis Profitability Ratios
2008
2009
2010 E
2011 E
2012 E
EBITDA Margin
18.6%
14.2%
14.5%
15.3%
15.5%
Adjusted PAT Margin
6.3%
2.5%
3.4%
4.5%
5.4%
10.8%
4.6%
7.9%
13.5%
17.2%
Sales
30.3%
21.7%
31.9%
57.8%
26.7%
EBITDA
21.4%
‐7.2%
35.0%
66.2%
28.5%
Adjusted PAT
17.4%
‐52.7%
84.0%
106.1%
51.6%
PE
10.6
22.3
12.1
6.4
4.2
P/BV
1.1
1.0
1.0
0.9
0.7
RoNW Growth Ratios
Valuation Ratios
EV/EBIDTA
7.6
9.4
7.6
4.8
3.5
M.Cap/Sales
0.7
0.6
0.4
0.3
0.2
BV
115.8
130.5
139.3
154.8
184.5
EPS
12.5
6.0
11.0
20.9
31.7
Cash per share (excl Debt)
3.1
4.4
5.8
4.9
6.8
Per Share Data
Source: Company data, Nirmal Bang Research
Initiating Coverage
Steel Strips Wheels Ltd.
Note
Initiating Coverage
Steel Strips Wheels Ltd.
Disclaimer This Document has been prepared by Nirmal Bang Research (Nirmal Bang Securities PVT LTD).The information, analysis and estimates contained herein are based on Nirmal Bang Research assessment and have been obtained from sources believed to be reliable. This document is meant for the use of the intended recipient only. This document, at best, represents Nirmal Bang Research opinion and is meant for general information only. Nirmal Bang Research, its directors, officers or employees shall not in anyway be responsible for the contents stated herein. Nirmal Bang Research expressly disclaims any and all liabilities that may arise from information, errors or omissions in this connection. This document is not to be considered as an offer to sell or a solicitation to buy any securities. Nirmal Bang Research, its affiliates and their employees may from time to time hold positions in securities referred to herein. Nirmal Bang Research or its affiliates may from time to time solicit from or perform investment banking or other services for any company mentioned in this document.
Initiating Coverage
Steel Strips Wheels Ltd. BUY Snapshot
Recommendation
Rs. 133 Steel Strips Wheels (SSWL), a part of the multifaceted Steel Strips
CMP (31/05/2010)
Auto Ancillary group, is engaged in manufacturing wheel rims for Cars, LCV, CV’s &
Sector
Stock Details
513262
BSE Code
SSWL
NSE Code Bloomberg Code
SSW IN
Market Cap (Rs. cr)
180.88 45%
Free Float (%)
Investment Rationale
•
161.9/45.45
52‐ wk HI/Lo
9,686
Avg. volume BSE (Monthly) Face Value
Rs.10
Dividend payout (FY 2009/08)
‐/16% 1.36 •
Shares o/s (Crs) Relative Performance
1Mth
3Mth
1Yr
SSWL
‐7.6%
36.2%
Sensex
‐3.0%
2.6%
160 140 120 100 80 60 40 May‐09
tractors. SSWL started commercial production from 1991. The company is armed with the latest know‐how, manufacturing automobile wheel rims at its state‐of‐the‐art manufacturing unit at Chandigarh, Chennai & Jamshedpur.
97.6% 15.3% •
• SSWL Aug‐09
Nov‐09
Mar‐10
Aggressive capacity expansion plans: SSWL had consistently gained market share from its competitors with competitive advantage. Further capacity expansion from 10 mn wheels to 15 mn wheels over next couple of years will provide significant growth opportunities to the company. Strong order book: SSWL has an order book of 10.4 mn wheels worth Rs.780 Crs to be executed in FY 2011. This provides near term revenues visibility. Increasing exports to boost revenues: Apart from domestic customers, the company is increasing its focus on international players. Recent product approvals and order pipeline will drive the export growth at a rapid pace. Change in product mix to enable margin expansion: Sales of high margin products like trucks and tractors wheels through Jamshedpur and Dappar plant will increase the operating margin of the company.
Valuation & Recommendation
Shareholding Pattern as of 31/03/2010
We believe that SSWL’s net sales will grow at a CAGR of 41.4% over a next two years whereas net profit is expected to grow at a higher Institutional (Incl. FII) 5.01% CAGR of 76.7% during the same period, on account of increase in Corporate Bodies 27.90% sales of high margin products. We expect the company to earn an EPS Public & others 15.06% of Rs. 20.91 in FY 2011 and Rs. 31.71 in FY 2012. At the CMP of Rs. 133 Sunil Jain ‐ V.P Equity Research (+91 22 3027‐2211) per share, SSWL is currently trading at a PE of 6.36x FY11E and 4.19x [email protected] FY12E EPS and looks very attractive. Based on our EPS of Rs. 20.92 for Ashish Khetan – Research Analyst (+91 22 3027‐2259) [email protected] FY 2011 and a target multiple of 12.0x we arrive at target of Rs. 250. Aditya Powani – Research Associate (+91 22 3027‐2241) Consequently, we recommend a BUY rating on the stock with a target [email protected] price of Rs. 250, indicating a potential upside of 88%. Promoters Holding
52.03%
Net Sales (RS. Crs)
Growth %
EBITDA (Rs. Crs)
Margin %
PAT (Rs. Crs)
Margin %
EPS (Rs.)
FY 2009 FY 2010 FY 2011E
317.3 418.5 660.5
18.4% 31.9% 57.8%
45.1 60.8 101.1
14.2% 14.5% 15.3%
7.8 14.3 29.6
2.5% 3.4% 4.5%
5.71 10.50 20.92
23.31 12.67 6.36
1.02 0.95 0.86
FY 2012E
837.1
26.7%
130.0
15.5%
44.8
5.4%
31.71
4.19
0.72
Year
P/E (x)
P/BV (x)
Initiating Coverage
Steel Strips Wheels Ltd. Business Overview Steel Strips Wheels ( SSWL) a part of the Steel Strips group is a recognized player in the development and production of steel wheel rims for Original Equipment Manufacturers SSWL’s product range comprises wheels rims for Passenger cars, Multi utility vehicles, Tractors, Trucks, OTR Vehicles as well as Two Wheelers. SSWL currently has two production facilities with a total capacity of 10 million wheels p.a. The company’s facilities are located in Dappar (near Chandigarh) and Oragadam (near Chennai). SSWL’s third facility, which is designed to produce only truck wheels, is currently being set up in Jamshedpur and will be commissioned in 2010. It will dispose of an initial capacity of 1 million wheels. Over the years company has expanded its client base and currently caters to all major Indian automakers.
Dappar, Punjab (Operational)
Capacity: 7.5 million Car /MUV/ Tractors/ Truck wheels
Steel Strips Wheels Limited Chennai, Tamil Nadu (Operational) Capacity: 2.5 million Car wheels
Jamshedpur, Jharkhand (Exp. to start in July 2010) Capacity: 1million Trucks
Dappar Plant (Punjab) SSWL’s mother plant is located at Dappar (in Punjab) having an annual capacity of 7.5 million wheels. The company manufactures wheels for Cars, Tractors, and Trucks from the plant. The company currently has 5 Rim Wheel manufacturing machines at this plant. On an average daily 15000 wheels are being manufactured and transported to Maruti Suzuki Ltd from this plant. The company plans to expand the capacity by 0.5 mn to 8 mn wheels during the current year. The table below provides a break‐up of capacity Segment Cars Tractors Trucks Others Total Capacity (Mn) 5.8 1.2 0.4 0.1 7.5
Initiating Coverage
Steel Strips Wheels Ltd. Chennai, Tamil Nadu The Chennai plant is having an annual capacity of 2.5 million which can manufacture only car wheels. Currently, the company supplies car wheels to many auto majors from this plant including Maruti and Renualt. SSWL has is planning to expand this facility to 5 million wheels by Feb 2011.
Jamshedpur, Jharkhand SSWL has established a new facility at Jamshedpur, Jharkhand at a cost of around Rs. 140 Crs. The company’s newest facility is currently undergoing a Dry run & commercial production is expected to begin from the month of July. The Jamshedpur plant is located close to the Tata Motors plant and has an annual capacity of 1 million Truck wheels. SSWL has already contracted Tata Motors to sell majority of its capacity. The company plans to sell 0.4 mn wheels from this plant in FY 2011 which is expected to contribute approximately Rs. 110 Crs to the company’s top‐line. SSWL plans to increase the capacity to 2 mn wheels by June 2011.
Investment Rationale Capacity expansion to provide significant growth SSWL’s Jamshedpur plant having an annual capacity of 1 Million wheel rims per annum is expected to commence production from July 2010. The company expects to primarily meet the requirements of Tata Motors through this plant. The company further plans to increase the capacity to 2 million wheel rims by June 2011. At the same time company is planning to expand its Chennai capacity by 2.5 million taking the total capacity to 5 million by Feb 2011. While company has already started a small capacity expansion plan in its Dappar plant where it intends to add 0.5 mn capacity. Once all these capacity addition plans are completed over next 12‐15 months, company will have an annual capacity of 15 mn wheel rims. These capacity additions will provide significant growth opportunities to the company. SSWL plant at Jamshedpur solely for heavy vehicles is expected to boost the revenue further from this segment. SSWL plans to sell 0.4 mn wheels from this plant in FY 2011 which is expected to contribute approximately Rs. 110 Crs to the company’s top‐line & around Rs 170 Crs for FY 2012. Further, the company has laid out an aggressive expansion plan to set up a 5 million wheel facility in Morocco in 2012. SSWL plans to set up a plant at Morocco as it has been selected as Renault’s sole wheel rim supplier for its Green field plant in Morocco which is expected to begin in 2012. Moreover, the plants proximity to Spain would help reduce the logistics cost as SSWL is a key supplier to auto majors like Volkswagen, Nissan & PSA.
Initiating Coverage
Steel Strips Wheels Ltd. Strong Customer Base to ensure steady revenues Over the years SSWL has build a large customer base. Today it has almost all major Indian auto players as its customers. Moreover, company has also served a few large global manufacturers. The company has maintained a strong relationship with its clients which will enable the company to boost it top‐line growth going forward. The following table provides a snapshot of company’s client base. Cars Tractors Trucks OTR vehicles Maruti Suzuki Honda Seil Cars Tata Motors Nissan General Motors
Mahindra & Mahindra Punjab Tractors International Tractors Eicher Tractors Escorts
Swaraj Mazda Tata Motors Ashok Leyland
JCB L&T
SSWL’s export currently stand at around 10% and is a major supplier to global majors like Renault & Peugeot in the Cars segment, PIAGGIO in the scooter segment & the Kubota group (Thailand) in the tractor segment. SSWL’S current Market share stands at 47% in the Cars segment, 80% in the MUV segment, 31% in the Tractor segment and 4% in the Trucks segment. Customer‐wise revenues break‐up (FY 2010)
The company currently generates 32% of its total revenues from Maruti and meets around 70% of the Maruti’s total wheel requirement in India. Going forward increasing volumes from Maruti will provide strong growth opportunities to the company.
Initiating Coverage
Steel Strips Wheels Ltd. Strong order book for FY 2011 The Company has a very strong order book of around 10.4 million wheels. The current size is equivalent to 100% of the installed capacity (including 0.4 million addition from the Jamshedpur plant for the year). In terms of value the order book size stands at Rs. 780 Crs which is entirely executable in FY 2011. The company expects to generate around Rs. 110 Crs from its new plant in FY 2011 while it will generate Rs. 240 Crs from this plant once it gets fully operational in FY 2013. Company has recently bagged orders from BMW, Renualt, and Tata Motors which will help company to operate at full capacity in 2011. The company currently has around 40 new products in the pipeline for 12 customers including New Holland, Volkswagen and Renault. Going forward, we expect the orders inflow to continue and provide long term revenues visibility. Robust growth in exports
We have seen SSWL secure orders from global auto majors like BMW & Renault over the last couple of months. In January the company bagged an order for the supply of spare wheels for the BMW MINI project in UK (around 48,000 wheel rims per annum). SSWL bagged several orders from Renault including supply of steel wheel rims for its green filed plant at Morocco. Moreover, company has strong tie‐ up with Kromag (Europe) and Kubota group (Thailand) which will boost the exports growth. SSWL recently bagged an additional order for over 30,000 wheels from Kromag. SSWL is targeting a growth in exports of around 135% for FY 2011. Company’s export sales stood at around Rs. 45 Crs in FY 2010 (10% of total sales). We believe that increasing opportunities in global market will enable the company to grow at a faster pace. Change in product mix to boost margins The company’s product mix will change rapidly once its Jamshedpur plant becomes operational. The sale of higher margin product i.e. trucks wheels from Jamshedpur will enable the company to improve its overall EBITDA margins. In truck and tractor wheels company enjoy an EBITDA margin of 18‐19% while in cars company gets an EBITDA margin of 15‐16%. Even the close proximity of its new plant to Tata Motors will enable the company to save on logistics. Considering these factors we expect the company’s EBITDA margin to increase in next couple of years.
Risk Factors Delay in completion of new plant Dry run of the Jamshedpur plant is currently on and is expected to start from the month of July. Any delay could result in lowering revenue estimates as revenues from Jamshedpur plan is expected to add 12% to the top‐line in FY 2011. Further, any delay in the capacity additions at Chennai and Dappar plan would lead to a deviation from our estimates.
Initiating Coverage
Steel Strips Wheels Ltd.
Cancellation of order owing to current crisis in the Europe SSWL derives a major percentage of its Export revenues from the European markets catering to auto majors like Renault, PIAGGIO, Peugeot Citroen and BMW. Furthermore, majority of its export growth is expected to come from Europe. Uncertainty over the sovereign debt crisis deepening in the region could have an impact on automobile sales softening in the region, which in turn could result in a slowdown for demand for auto components including wheels. Moreover, the company faces a risk of the cancellation of current orders from its prestigious customers in case of severe crisis and slowdown in the Europe.
Industry Analysis India is fast emerging as a global automobile giant with both automobile and auto component sectors witnessing impressive growth from the past few of years barring FY 2009. The automotive industry has emerged as one of the prominent manufacturing sectors of the Indian economy, contributing as much as 4% to the total GDP. Going forward, the auto industry is expected to grow at 14% in FY 2011. Growth of the automobiles industry Domestic players in the automotive OEMs are adding capacities to meet future demand, driven by both buoyant domestic market and growing vehicle export market, particularly for small cars, two wheelers and light commercial vehicles. New Global players are also entering the market and setting up huge capacities which will increase the breadth of the domestic market and boost vehicle exports from India. Passenger car segment‐on fast lane In the Passenger car segment, the growth is mainly led by the growing middle class and the higher disposable income for them. New entrants in the market like Renault, Volkswagen and BMW will aid in increasing the depth of the passenger car market and further the story of India as a large automotive market and an alternative low‐cost manufacturing base. The exports in this sector are primarily led by players like Hyundai and Maruti. Commercial vehicle market: Fundamentals positive The commercial vehicle segment has grown over the past three years largely on account of the regulatory changes and favorable macroeconomic fundamentals. We believe the demand for commercial vehicles will grow at an average of 9‐10% p.a. over the long term; driven by the robust industrial sector and the infrastructure build out. Big International players like Volvo, MAN Force Motors have also set up shop in India. This move signals their confidence in the robust growth outlook for the Indian CV market over the medium to long term, even though their initial capacities are not substantial.
Initiating Coverage
Category Passenger Vehicles CV 3‐Wheelers 2‐Wheelers Total
Category Passenger Vehicles CV 3‐Wheelers 2‐Wheelers Total
Steel Strips Wheels Ltd. Domestic Sales Trends 2004 2005 2006 902,096 1,061,572 1,143,076 260,114 318,430 351,041 284,078 307,862 359,920 5,364,249 6,209,765 7,052,391 6,810,537
2007
2008
2009
2010
CAGR(%)
1,379,979 1,549,882
1,552,703
1,949,776
13.7%
467,765 490,494
384,194
531,395
12.6%
403,910 364,781
349,727 7,437,619
440,368 9,371,231
7.6%
7,897,629 8,906,428 10,123,988 9,654,435 9,724,243 12,292,770
10.3%
Automobile Export Trends: 2004 2005 2006 129,291 166,402 175,572 17,432 29,940 40,600 68,144 66,795 76,881 265,052 366,407 513,169 479,919 629,544 806,222
7,872,334 7,249,278
2007
2008
2009
2010
9.7%
CAGR(%)
198,452 218,401
335,729 446,146
49,537 58,994
42,625 45,007
17.1%
143,896 141,225
148,066 173,282 1,004,174 1,140,184
16.8%
1,011,529 1,238,333 1,530,594 1,804,619
24.7%
619,644 819,713
22.9%
27.5%
Source: SIAM, Nirmal Bang Research
Automotive Components Industry Demand Co‐relation The auto components industry has largely mirrored the growth trend witnessed in automobile production. We saw a flat growth of just of 0.7% in domestic automotive sales at 9.72 million units in 2009 which increased by 26.4% to 12.29 million units in 2010. On an overall basis the total sales grew 25.3% from 11.2 million units to 14.09 million units in 2010. Rising competition, increasing cost pressures led the global players to outsource certain portion of components to low cost countries which in result offers immense outsourcing opportunities to Indian auto component manufacturers. Moreover, India provides trained manpower at competitive costs making India a favored global manufacturing hub. The attractiveness of the Indian markets on one hand and the stagnation of the auto sector in markets such as Europe, US and Japan on the other have resulted in shifting of new capacities and flow of capital to the Indian automobile industry. We believe auto component exports from India are set to grow at 25‐30% CAGR for the next 5 years, given the buoyant growth in the auto segment accompanied by expansions undertaken by majority of component manufacturers.
Initiating Coverage
Steel Strips Wheels Ltd.
Reasons for buoyant growth in the automotive components sector India Center for Skill Based Mfg and Engineering Increasing India Global Distressed Suppliers Compact Car Hub in US Europe Auto Growth in Increased Emerging Markets Components Sourcing from LCC Opportunity for Large Scale Auto Component Manufacturing in India Source: ACMA, Nirmal Bang Research
Component outsourcing Of the total global auto components trade of US$ 185 billion, India's share is estimated at 0.4%. The ACMA‐McKinsey Vision 2015 document estimates the potential for the Indian auto component industry to be US$ 40‐45 billion by 2015. Of this, 50% is expected to come from exports.
Source: ACMA, BS, Nirmal Bang Research
Initiating Coverage
Steel Strips Wheels Ltd. India is estimated to have the potential to become one of the top five auto component economies by 2025with the investments growing at a CAGR of 13.5% from 2009‐2016. The industry has been experiencing a high growth rate of 20% over the period 2004‐09 and is expected to grow at a rate of 13% over the period 2009‐16. Similarly, while growth rate of exports has been 21.2% during 2004‐09, the growth rate is expected to grow by 30.9% during 2009‐14. Considering the growth opportunity on offer in the industry and the SSWL’s expansion plan we believe that company can witness significant growth and increase its market share.
Peer Comparison We believe that Wheels India is the best comparable company as both the companies involved in the production of automotive wheel rims. During the current year the company has outperformed Wheels India in terms of growth & margins. SSWL has recorded EBITDA margin of 14.5% for FY 2010 while Wheels India has just managed 7.3% EBITDA margin for the same period. The top‐line growth of Wheels India has witnessed a moderate growth of 10.0% during FY10 while SSWL has witnessed a growth of 31.9% during the same period.
Company
Price
SSWL
135
Wheels IN
288
Eps
PE
EBIDTA
Margin
10.98
12.3
Mcap 176.4
Sales 418.46
60.50
14.5%
PAT 14.35
Margin 3.4%
13.12
22.0
284.2
1241.38
91.16
7.3%
12.95
1.0%
Initiating Coverage
Steel Strips Wheels Ltd. Valuation & Recommendation
We believe that SSWL’s net sales will grow at a CAGR of 41.4% over a next two years whereas net profit is expected to grow at a higher CAGR of 76.7% during the same period, on account of increase in sales of high margin products. We expect the company to earn an EPS of Rs. 20.91 in FY 2011 and Rs. 31.71 in FY 2012. At the CMP of Rs. 133 per share, SSWL is currently trading at a PE of 6.36x FY11E and 4.19x FY12E EPS and looks very attractive. The company has historically traded at a PE multiple of more than 12 (as shown in the PE Band below) except when market conditions were bad. Therefore, we believe that SSWL should be valued on a PE multiple of 12.0x. Based on our EPS of Rs. 20.92 for FY 2011 and a target multiple of 12.0x we arrive at target of Rs. 250. Consequently, we recommend a BUY rating on the stock with a target price of Rs. 250, indicating a potential upside of 88%.
PE Band
Initiating Coverage
Steel Strips Wheels Ltd.
Q4 FY10 Results •
•
•
SSWL reported revenues grew 7.1% Q‐Q to Rs. 123.8 Crs in Q4 FY10 primarily driven by increase in volumes. On a Y‐Y basis, revenues saw a jump of 69% on back of growth of the automobile sales. The Company reported EBIDTA of Rs 17.9 Crs in Q4 FY10 as compared to Rs 14.2 Crs in Q3 10 due to an increase in sales & lower Raw material costs. Raw material accounted for 62% of total costs compared to 67% in Q310. SSWL reported a net profit of Rs. 5.5 Crs in Q4 FY10 as compared to Rs 2.3 Crs in Q3 FY10 (+140.2% QoQ). On a Y‐Y basis we saw the profit increasing from Rs. 0.3 Crs to Rs. 5.5 Crs.
Income Statement (in crores RS.) Pa rti cul a rs
Q4 FY10
Q3 FY10
Q‐o‐Q
Q4 FY09
Y‐o‐Y
Gros s Sa l es
134.5
124.5
8.0%
80.2
67.6%
Net Sa l es
123.8
115.6
7.1%
73.3
69.0%
Increa s e/Decrea s e i n s tock
0.7
(2.5)
n/a
0.7
‐4.1%
Ra w Ma teri a l s
76.6
78.0
‐1.8%
43.3
77.1%
Empl oyee Cos t
6.0
5.9
1.5%
3.1
91.6%
Expendi ture
Other expendi ture
22.7
20.1
12.9%
14.7
53.7%
Tota l Expendi ture
105.9
101.5
4.4%
61.9
71.3%
EBITDA
17.9
14.2
25.9%
11.4
56.4%
Ma rgi n
14.4%
12.3%
216 bps
15.6%
(116) bps
Interes t
3.9
3.8
2.1%
4.2
‐6.5%
Depreci a ti on
6.8
6.8
0.3%
4.8
41.6%
Other i ncome
0.5
0.1
642.9%
(0.3)
‐257.6%
Ca pi ta l Is s ue expens es w/off
0.0
0.1
‐100.0%
0.0
n/a
Les s :(Pri or peri od a djus tment)
0.3
0.0
1350.0%
0.4
‐29.3%
Profi t Before Ta x
7.4
3.5
108.2%
1.7
337.5%
Provi s i on for Ta x (Incl udi n deffered ta
1.9
1.2
49.2%
1.4
37.0%
Net Profi t
5.5
2.3
140.2%
0.3
1566.7%
Adjus ted Net Profi t
5.5
2.3
140.2%
0.3
1566.7%
Ma rgi n
4.4%
2.0%
246 bps
0.5%
399 bps
Ea ri ngs per s ha re (Rs )
4.2
1.8
140.2%
0.2
1641.5%
Initiating Coverage
Steel Strips Wheels Ltd.
Financial Statements Income Statement (in crores RS.) 2008
2009
2010
2011E
2012E
Gros s Sa l es
302.0
357.8
451.8
733.9
930.1
Net s a l es
260.8
317.3
418.5
660.5
837.1
‐0.7
‐2.2
‐2.4
0.0
0.0
Ra w Ma teri a l s
162.1
212.2
265.7
422.0
537.2
Increa s e/Decrea s e i n s tock Empl oyee Cos t
10.2
12.9
20.9
31.7
39.3
Sel l i ng ,Admi ni s tra ti on & other Expens es
40.6
49.3
73.5
105.7
130.6
Total Expenditure
212.2
272.2
357.6
559.3
707.1
EBITDA
48.6
45.1
60.8
101.1
130.0
Ma rgi n (on net s a l es )
18.6%
14.2%
14.5%
15.3%
15.5%
Interes t
11.9
16.0
16.9
26.2
27.7
Depreci a ti on
14.4
17.1
25.0
31.1
35.4
Other i ncome
1.1
1.1
0.9
1.0
1.0
Les s :(Pri or peri od a djus tment)
0.0
0.2
0.3
0.0
0.0
Ca pi ta l Is s ue expens es w/off
0.1
0.1
0.1
0.1
0.0
Profi t Before Ta x
23.3
12.8
19.5
44.8
67.9
Provi s i on for Ta x (Incl udi n deffered ta x)
6.9
5.0
5.2
15.2
23.1
Net Profi t
16.5
7.8
14.3
29.6
44.8
Adjus ted Net Profi t
16.5
7.8
14.3
29.6
44.8
Ma rgi n (on net s a l es )
6.3%
2.5%
3.4%
4.5%
5.4%
Ea ri ngs per s ha re (Rs )
12.53
5.71
10.50
20.92
31.71
13.1
13.7
13.7
14.1
14.1
Equi ty
Initiating Coverage
Steel Strips Wheels Ltd.
Balance Sheet (in crores) 2008
2009
2010 E
2011 E
2012 E
13.1
13.7
13.7
14.1
14.1
Sources of Funds Shareholders' Equity Reserves
139.2
156.7
168.3
204.6
246.6
Share Holders Funds
152.3
170.4
182.0
218.7
260.7
Secured Loans
169.2
234.8
277.1
305.1
301.6
15.5
0.0
0.0
0.0
0.0
184.7
234.8
277.1
305.1
301.6
12.2
15.4
15.4
15.4
15.4
349.2
420.6
474.5
539.2
577.6
313.0
359.9
406.8
435.7
430.2
Investments
0.2
0.2
0.2
0.2
0.2
Cash
7.6
6.9
9.6
17.8
41.3
Receivables
40.0
43.7
56.2
85.0
107.8
Inventories
40.5
52.8
75.4
104.8
132.9
Loans and Advances
22.4
13.4
12.6
16.5
18.4
Other current assets
2.1
1.6
2.9
4.6
5.9
Unsecured Loans Total Debt Net Deferred Tax Total Liabilities and Equity Application Of Funds Net Fixed Assets (incl WIP)
112.6
118.4
156.7
228.7
306.3
Current Liabilities
Total Curr. Assets and Loans & Adv
72.8
57.5
89.1
125.4
159.1
Provisions
4.0
0.4
0.0
0.0
0.0
Total Curr.Liabs & Prov.
76.8
58.0
89.1
125.4
159.1
Net Current Assets
35.8
60.4
67.6
103.3
147.2
Miscellaneous Expenses not writte
0.1
0.1
0.0
0.0
0.0
349.2
420.6
474.5
539.2
577.6
Total Assets
Initiating Coverage
Steel Strips Wheels Ltd.
Cash Flow Statement (in Rs Crs.) Cash Flow
2008
2009
2010E
2011E
2012E
Profit Before Tax
23.3
12.8
19.5
44.8
67.9
Plus Depreciation
14.4
17.1
25.0
31.1
35.4
Misc expenses w/off
0.1
0.1
0.1
0.0
0.0
Interest received
(0.3)
(0.4)
0.0
0.0
0.0
Interest paid
11.0
14.4
16.9
26.2
27.7
(Increase)/decrease in inventory
(7.3)
(12.3)
(22.7)
(29.3)
(28.2)
(Increase)/decrease in trade & other receivables
(32.3)
5.9
(12.5)
(28.9)
(22.7)
(Increase)/decrease in trade payables
68.4
(15.3)
27.4
31.9
29.6
Others
0.0
0.0
3.3
(1.3)
0.9
Total Tax paid
(2.4)
(3.4)
(5.2)
(15.2)
(23.1)
74.9 (103.0)
18.9 (64.1)
51.7 (71.8)
59.3 (60.0)
87.6 (30.0)
0.3
0.7
0.0
0.0
0.0
(102.7)
(63.3)
(71.8)
(60.0)
(30.0)
Cash Flow from Operations Purchase of Fixed assets and tangibles Net Others Cash Flow from investing (b) Proceeds from issue of equity shares incl premium
21.9
10.0
0.0
0.0
0.0
Proceeds from long term borrowings
20.5
50.2
42.3
37.9
(3.5)
Divedend paid
(1.8)
(2.0)
(2.7)
(2.8)
(2.8)
Interest paid
(11.0)
(14.4)
(16.9)
(26.2)
(27.7)
Others
0.0
0.0
0.0
0.0
0.0
Cash Flow from Financing
29.6
43.8
22.7
8.9
(34.0)
Net Cash Flow
1.8
(0.7)
2.6
8.2
23.5
Beginning Cash Balance (including bank guarantees)
5.8
7.6
6.9
9.6
17.8
Ending Cash Balance
7.6
7.0
9.6
17.8
41.3
Initiating Coverage
Steel Strips Wheels Ltd.
Ratio Analysis Profitability Ratios
2008
2009
2010 E
2011 E
2012 E
EBITDA Margin
18.6%
14.2%
14.5%
15.3%
15.5%
Adjusted PAT Margin
6.3%
2.5%
3.4%
4.5%
5.4%
10.8%
4.6%
7.9%
13.5%
17.2%
Sales
30.3%
21.7%
31.9%
57.8%
26.7%
EBITDA
21.4%
‐7.2%
35.0%
66.2%
28.5%
Adjusted PAT
17.4%
‐52.7%
84.0%
106.1%
51.6%
PE
10.6
22.3
12.1
6.4
4.2
P/BV
1.1
1.0
1.0
0.9
0.7
RoNW Growth Ratios
Valuation Ratios
EV/EBIDTA
7.6
9.4
7.6
4.8
3.5
M.Cap/Sales
0.7
0.6
0.4
0.3
0.2
BV
115.8
130.5
139.3
154.8
184.5
EPS
12.5
6.0
11.0
20.9
31.7
Cash per share (excl Debt)
3.1
4.4
5.8
4.9
6.8
Per Share Data
Source: Company data, Nirmal Bang Research
Initiating Coverage
Steel Strips Wheels Ltd.
Note
Initiating Coverage
Steel Strips Wheels Ltd.
Disclaimer This Document has been prepared by Nirmal Bang Research (Nirmal Bang Securities PVT LTD).The information, analysis and estimates contained herein are based on Nirmal Bang Research assessment and have been obtained from sources believed to be reliable. This document is meant for the use of the intended recipient only. This document, at best, represents Nirmal Bang Research opinion and is meant for general information only. Nirmal Bang Research, its directors, officers or employees shall not in anyway be responsible for the contents stated herein. Nirmal Bang Research expressly disclaims any and all liabilities that may arise from information, errors or omissions in this connection. This document is not to be considered as an offer to sell or a solicitation to buy any securities. Nirmal Bang Research, its affiliates and their employees may from time to time hold positions in securities referred to herein. Nirmal Bang Research or its affiliates may from time to time solicit from or perform investment banking or other services for any company mentioned in this document.
