Steel Strips Wheels Ltd Q4 FY25 Earnings Analysis

- Tractor segment: Anticipated continued growth with significant potential for expanded market share (Page 3). - Export revenue: Projected to reach INR550-600 crores for FY '25 with improving geopolitical conditions driving demand increase, especially from Q4 (Page 3, 14). - Alloy wheels: Expected 5-6% industry volume growth for FY '25; company aims to outpace this with 7-8% growth and expand capacity to 5-10 million wheels over next 5 years (Pages 6, 10). - Aluminum knuckles: Nascent but high-potential segment targeting INR1,000 crores market size over next 3-4 years with 0.45 million units phase 1 capacity expanding to 1 million units; revenue forecast INR14-15 crores in FY '24, INR80 crores in FY '26, and INR105-115 crores in FY '27 (Pages 5, 8, 20, 21). - Steel wheels: Steady growth alongside alloy wheels; currently a major revenue driver (Page 10). - Overall EBITDA and margins: Expected improvement with new product lines and capacity utilization rising (Pages 7, 13).

- The company anticipates record EBITDA accretion in the next financial year driven by alloy wheels, exports, and aluminum knuckles segments. - EBITDA per wheel increased to INR262 and is expected to improve further with higher-value products like alloy and OTR wheels. - Knuckles business revenue visibility: INR80 crores in FY '26, increasing to INR105-115 crores in FY '27 with double-digit margins. - Export revenue expected to grow 40-50% next year supported by a firm order book. - Alloy wheel volume is poised to grow with 75-80% capacity utilization expected next year and a 7-8% alloy penetration growth forecasted. - EBITDA margins improved to ~11.3% in recent quarters with cost optimization efforts ongoing. - Significant capex planned (~INR150-160 crores for FY '25-'27) funded from internal accruals without additional debt thereby supporting growth. - Earnings growth driven by expansion in high-margin products, increasing market share, and capacity utilization.

- Capex guidance of INR150-160 crores planned for FY '25-'26 and '26-'27, funded entirely from internal accruals, no new borrowings expected. - Investments include expansion in alloy wheels capacity from 5 million to 10 million units over 5 years. - Knuckles capacity expansion from 0.5 million to 2.5 million units targeted with a 2 million plant capex expected soon (execution 9-11 months). - Jamshedpur plant expansion to increase steel wheel capacity from ~150,000 to 200,000 units/month, adding ~100 bps margin. - Tractor capacity moving from 70,000 to 100,000 units/month underway. - Capex related to aluminum knuckles, first phase (~0.45 million units) with ROCE >20%, breakeven ~55-60% utilization. - Strategic discussions underway for futuristic metal technologies; at a preliminary stage. - Customer-driven capex signals expected by February for knuckles plant.

- No new borrowings planned: Management stated that the capex of INR150-160 crores for FY '25-'27 will be fully funded through internal accruals with no need for new debt. - Current debt status: Total debt is around INR962 crores, with INR406 crores long-term and the rest short-term. - Debt repayment: Regular repayments of INR100-110 crores annually are scheduled, with opportunities explored for prepayments whenever possible. - No new additions to debt: Management confirmed that there will be no new additions to working capital or term loans. - Equity fundraising: There was no mention or indication of any equity fundraising plans during the call.

- Current export order book is around INR175 crores to INR180 crores. - For Q4, expected export orders of INR155 crores to INR160 crores are considered doable. - Knuckle business: 7 RFQs are under discussion involving electric and ICE platforms, with steel to aluminum knuckle migration underway. - Mass production of knuckles started in November; expected revenue INR14-15 crores in the current year, INR80 crores in FY '25-'26, and INR105-115 crores in FY '26-'27 at 65% utilization. - Capex guidance for knuckle plant of INR200 crores expected by February, with execution taking 11-12 months. - Discussions ongoing with OEMs like Stellantis and VW Group for 17 projects, with one already awarded for next financial year delivery. - Alloy wheel and exports have firm order books supporting 40-50% growth next year.