Steel Strips Wheels Limited – Attractive Valuations

Thanks @tushar24 for sharing the Axis Security report. Axis report indeed confirms the presumption that SSWL is venturing into Flow form alloy casting technology. As per my limited reading, flow form alloy casting is an evolved technology with significant market potential due to inherited advantages – specially in EV segment. Except Wheels India, no other Indian OME supplier has so far adopted to the latest technology. In that sense it is significanlty positive for SSWL.

What has also caught attention is the mentioned timeline for capacity enhancement of alloy wheels from 3.2M to 4.8M by Q4’24. Even during the most recent concall management had guided for Q2’24 (by around August). Likewise, Axis report is projecting for FY’24 revenue of 4,360 Crs. whereas Managment was guiding for ~4600 Crs. What really changed within last 2 months?

SSWL getting into steering knuckles is also an interesting development from cross sell and product diversification perspective.

• Purely from market size perspective, India has current run rate of ~3M+ PasCars and ~0.75M CVs per year. As indicated in Axis report, each vehicle needs 4 steering knuckles. So broadly that must be broad market size (off-course, its very crude calc, there will be nuances).
• At least in MHCV segment, Bharat Forge is biggest manufacturer of steering knuckles with 40% – 60% of domestic market. Their production capacity must be ~750,000/year. Another significant player must be Ramkrishna Forging, however their capacity may be just fractional to what Bharat Forge has. In that sense, Bharat Forge has the pole position in the given product segment.
• Interestingly, (and not surprised by looking at SSWL’s play book),steering knuckles are also under the ambit of Anti-dumping duty structure from China. Initially, the ADD was imposed in 2008, got extended in 2015 and again got extended in 2020 (link).
  • China based Hubei Tri-Ring Forging Co appears to be biggest player.
  • During the second term of ADD, there was significant import volume increase between 2016 -2019 despite the ADD structure being in place.
  • Silver lining is that not much of trans-shipping/circumventing of ADD by routing the shipment through other countries (prevalent practice observed in so many products where ADD has been imposed).
    

Thanks,
Tarun
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