Steel Strips Wheels Summary Q1FY’24:
Summary of the call:
Capex:
- Company invested in automation and is focusing on EV and casting businesses for future growth.
- Plans for another capacity expansion once the current order book is filled, expected to take around 15 to 16 months.
New Products:
- Increased R&D staff and capacity in aluminum wheels segment.
- R&D team focused on aluminum wheels and working on a new casting product.
Guidance:
- Expects improvement in EBITDA margins, aiming for 15% increase in absolute EBITDA in FY24.
- Expects margin profile to improve in H2 with increased sales in aluminum wheels.
- Expects substantial gains in operating leverage from new capex in H2.
- Alloy wheel business expected to lead the recovery.
- Revenue from new casting and Redler businesses expected in Q4.
Business Strategy:
- Gave up low-margin business with Maruti in passenger car steel wheel segment.
- Focused on improving profitability and optimistic about growth in alloy wheels segment.
- Awaiting NCLT order for AMW acquisition to contribute to commercial vehicle business.
- Confident in cost advantage and quality in the global market for aluminum wheels.
Financials:
- Generated significant cash flow in the past, considering deployment of next INR 1,000 crores.
- CEO de-pledged 50% of pledged shares, addressing investor concerns.
- Emphasizes conservative accounting policies and focusing on future ROCEs.
Staffing:
- Hired 60 people for R&D in alloy wheels.
- R&D team not fungible, but cross-functionality possible in the future.
Market Outlook:
- Expects raw material costs to increase in the coming quarters.
- Sold out in alloys and CVs, tractor business performing well.
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