Key highlights from Steel Strips Wheels Ltd Q3FY23 Concall:
CMP: ₹ 150
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CMP: ₹ 150
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1. The exports of the company declined Y-o-Y from ₹800 crore to ₹300 crore due to anti dumping duties, surplus inventory in America, increase in oil prices and the segment to which the company caters had reduced production.
However, the inventory has been run down, there is a drop in energy prices in America therefore, the company expects to see strong exports Q4FY23 onwards with the exports to at least double post Q4FY23 to the American and European market.
2. The company plans to do a capex of around ₹140 crore to ₹150 crore in FY23 for the aluminium wheel capacity enhancement . The major capex will go towards the aluminium wheels capacity expansion in FY24.
The company has signed a contract with NIrali company to make controllers for EV and to support his contract the company is planning a capex of ₹20 crore to ₹100 crore depending on the market response.
The company has planned another capex of ₹100 crore for FY 24-25 for an aluminium casting part which is an import substitute product.
3. The aluminium castings business is a new business for the company where they have sorted the technology and have got good traction from OEMs and the castings made here will go into the passenger vehicle segment.
The company will begin with supplying small quantities by the end of June 2023 which will be validation samples and the company begins to start actual production from FY25 once they get validation. This product will majorly be used in the EV space.
3. The company has planned a capex of ₹150 crore to ₹160 crore for FY23 and FY24 for alloy wheels and this cost is without considering the AMW. AMW acquisition cost will be over and above this.
The AMW acquisition of the company has been delayed as they are not getting a date from the Supreme Court. Once they get the approval from the NCLT,
the company will do a total capex of around ₹150 crore out of which ₹20 crore has already been spent and they are positive about getting the possession of the plant by April 2023.
4. On the alloy wheels business, the company started with a capacity of 1.5 million wheels, today they are at 3 million wheels and by June 2023 they expect to reach 4.5 million wheels.
The capacities of the company will be getting sold by the end of FY23 which will lead to the export business here going up by 50%. The company is targeting major aftermarket customers in the American and European markets along with OEM customers.
The company is adding small capacities every quarter to cater to the increase in exports which they expect going forward
The company is in the stage of signing the definitive agreements with Redler Technologies which is an Israeli company for EV controller manufacturing.
The company is in the stage of signing the definitive agreements with Redler Technologies which is an Israeli company for EV controller manufacturing.
The company expects to sign the agreement in the next 2-3 weeks and in the meanwhile they have begun to work on the manufacturing of controllers and have achieved a target price for making the controller. The company expects to begin production in the next 4 months in India.
5. The company had almost ₹375 crore of debt on their balance sheet at the beginning of FY23 and within 10 months they had managed to pay off ₹150 crore due to healthy cash flows.
The company may not need many borrowings to fund their capex plans however, there may be some increase in borrowings depending on when they get the AMW project.
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