SSWL Q1 FY24 Result Update:
- Order books: Despite the higher competitive intensity in the alloy wheel space, the company’s domestic alloy wheels order books are full until FY26 for existing OEMs as the company is the lowest cost producer of Aluminum wheels in the world and it ranks in the top 5 in terms of quality. Its CV order book is also sold out, while tractors and PV have a scope to grow.
- D/E stands at 0.52x and the management expects to repay Rs 60 Cr in FY24.
- The company maintained its earlier guidance for volume sales growth at 12-15% YoY in FY24 and revenue at ~Rs 4,500 Cr (vs. ~Rs 3,560/4,040 Cr in FY22/23) on similar commodity price levels. This will be mainly led by increased alloy wheels sales, a pick-up in exports, and a CV upcycle.
- The company identifies two potential game changers: 1) Targeting 10 billion wheels in 3-5 years and 2) Becoming the top OEM.
- Additionally, the management stated that it’s very close to adding Maruti to its list of OEMs for Alloy wheels, which will provide more visibility in domestic demand.
- The company has ventured into casting for the automotive sector and has hired personnel for that purpose. Sales are expected to grow due to new business opportunities where revenue will start realizing Q4 FY24 onwards.
- The company does not foresee significant changes in EBITDA percentage or per-wheel margin. The company expects overall higher EBITDA driven by progressive growth in aluminium wheel sales and export expansion. The company aims for a high teen EBITDA margin.
- Growth Drivers: Shifting sales mix to higher margin businesses of Alloy Wheels & Exports, Development of Robotic Automated Operation Process for Operating Cost Rationalization, Foray in EV segment, Steel Wheel Market to grow at 8% p.a. whereas Alloy Wheel Market to grow at 12% p.a. over next 5 years, Strengthening Balance Sheet thereby Improving Return on Capital Employed & Return on Equity, Increasing Cash accruals in repayment of Long term debt.
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