Accelerating the growth pedal, trades inexpensive
About the stock: Steel Strips Wheels Ltd. (SSWL), is a Chandigarh based company involved in designing and manufacturing of automotive wheels – both steel and alloy wheels. It currently has five plants in India with total production capacity of ~2.6 crore wheels per annum (including ~0.5 crore of alloy wheels)
• FY26 revenue mix: Alloy wheels: 36%; Steel wheels: 63%, Knuckles: 1% • FY26 market share in steel wheels: PV: 39%; M&HCV: 53%; Tractor: 43%
Q4FY26 Results: On standalone basis, Net sales came in at ₹1,475 crore (up 20% YoY). EBITDA for the quarter stood at ₹149 crore with corresponding margins at 10.1% (up 40 bps QoQ). PAT for Q4FY26 came in at ~₹64.5 crore (up 4.5% YoY).
Investment Rationale:
• Strategic capacity expansion drives Volume & Segment diversification: SSWL is a leading wheel manufacturer domestically and is a prominent player in domestic oligopolistic wheels industry. It is well-positioned for a strong growth trajectory, supported by significant capacity expansion and diversification across high-margin segments. SSWL has increased its alloy wheel capacity from 30 lakh to 50 lakh units in FY26 and further aims to reach 62 lakh units in FY27E. Alloy wheels already contribute over one- third of revenue and continue to grow faster than the overall industry. The knuckles business, launched in FY25, is set for multi-fold growth with capacities expanding from 5 to 11 lakh units by FY27E with orders for optimal capacity utilisation already secured for FY27E. The upcoming expansion adds substantial alloy wheel and aluminium knuckle capacity, creating a potential ₹700–800 crore revenue opportunity at maturity.
• Optional Export Upside and Premiumization at Attractive Economics: Exports declined 19% in FY26 due to U.S. tariff-related disruptions and adverse trade conditions. However, management believes the environment has normalized considerably. In addition, SSWL has diversified away from excessive dependence on the U.S. market by winning business in Europe, Latin America, and Asia. Export revenue is expected to recover to around ₹600 crore in FY27 compared with ₹454 crore in FY26. Management is guiding for EBITDA per wheel expansion from ₹262 to approximately ₹300 in FY27, while also targeting EBITDA of ~₹650 crore. Since much of the future growth comes from better utilization of existing assets, incremental margins should be accretive in nature. On the financials front, healthy cash flow generation is the key USP at SSWL with CFO generation in FY26 pegged at ~₹ 350 crore (CFO yield: 10%). We expect these attributes to remain amidst its penchant for higher growth, improving product mix & greater export play, meriting re-rating of SSWL.
Rating and Target Price
• We have a positive view on SSWL amid powertrain agnostic product profile (no EV risk), healthy volume growth visibility, increasing share of exports & alloy wheel in overall sales mix, consequent rise in margins & return rations. We now value SSWL at ₹ 280 i.e. 16x P/E (<1x PEG) on FY28E EPS & maintain our BUY rating on the stock.
