Good Notes prepared. Good plans for next 3 5 years in alloy and Aluminium wheels . What could be itâs sales approx after 3 5 years ? Just rough estimation
- Export Outlook is very optimistic for FY24/25. Expected to achieve 600 cr & 1000 cr revenue from export in FY24 & FY25. They are saying that exports have bottomed out in Q3FY23 and now will see an uptick. US has started to show demand and they are talks for exporting alloy wheels in Europe and two big OEMs. Inventory has run down and energy prices are cooling down.
- They are increasing alloy wheel production capacity as demand has started to pick up by 1.5 million units p.a. This will operationalize in June CY23.
- EBITDA margins are expected to increase due to change in product mix. Increased share of revenues from Alloy wheels and Exports will help improve margins.
- Top line expected to 4100 cr in FY23 (out of which 3035 cr has been done until 9M so seems achievable). FY24E top line is 5000 cr.
- The tax benefit due to the utilization of MAT credit is expected to materialise in Q1FY24, thereby lowering the effective tax rate to 25.2% from the existing 35% in Q3FY23.
- SSWL is entering a new business of a proprietary technology held by Israelâs Reddler Technologies. This will help them enter the motors and controllers business. Will also help improve margins. They will also be able to supply assembled powertrains to OEMs.
- Capex: FY23 Capex for full year is 150 cr. FY24 is 150 cr out of which 100 cr is on alloy wheels, 20 cr on EV controllers and 30 cr on maintenance. In FY25, they will incur capex of 100 cr in Aluminium Castings Business.
- Adjusted EBITDA removing inventory gains/losses is 21% in 9M YOY.
For FY24E they are guiding 5000 cr revenue.
SSWL Management Interview:
- Reiterating on the Export Outlook that FY23 Export Revenue will be 300 cr where as 550-600 cr in FY24.
- Reiterating the same: Top line expected to 4100 cr in FY23 (out of which 3035 cr has been done until 9M so seems achievable). Full Year EBITDA will 450 crs.
- FY24 Revenue was guided to be 5000 cr which they are now saying will be 4500-4700 cr. EBITDA margins will be 15-17%.
- Debt levels will reach double digits in the next 1.5 years.
This has been changed to 4500-4700 cr in a recent management interview on CNBC.
Could you post a link to the interview? The EBITDA margin guidance looks a bit unbelievable. This interview says EBITDA growth will be 15-17%, not margin.
https://twitter.com/CNBCTV18News/status/1638822422395912192?t=GCRzelCjwed61SBbku8Ifw&s=19
Yes thats the one.
Actually he says growth for EBITDA, but in CNBC writings at the bottom of the screen, it was written 15-17% margin so i thought i might have heard it wrong. So i changed it to Margin. But yes its growth mostly.
SSWL Redler
Redler Technologies specialize in making motor control unit. What could be interesting is their product EV-Rider 85 / 135 / 200 which can be used as a hub motor in 2W EVs.
Lots of companies are jumping into the EV motor controller, but the market is also growing at a very high rate.
disc: not invested, tracking
Good that you bought this up. From what I understand, SSWL, Greaves Cotton, Sterling Tools, seem to have jumped into fray for MCU. My basic understanding is, this is a critical component, in the sense that once a manufacturer zeroes in on a supplier, he will most likely not change it so easily, because he might have to do some degree of customization MCU vis a vis his BMS/Motor etc⌠All the Indian players are relying on a foreign partnership for what seems like a critical component. There are reports that this might be costing about 10% of the cost for a EV.
Are these estimates reliable ?
If its such a valuable component, any idea who are the suppliers to the current EV players. What would be at stake for the EV manufacturers to change supplier to these new players ?
This aside, perhaps we should have a thread to discuss the EV industry dynamics in details. If you like the idea, kindly take the lead to create a thread.
Sterling tools has motor control unit.
Can they achieve the runrate of 400 cr net sales per month is a thing to watch out in short term and long-term yes there seems a potential growth in topline but to a extent of 10% and even the guided ebita is 11% debt reduction is a possibility and depreciation may come down in coming years helping the bottom line sustaining the export growth and bringing back the domestic volume is a watch
Disl invested and buying from low value
https://twitter.com/Alazyinvestor13/status/1677763631830945792?s=20
Steel Strip wheels KTA:
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FY24 Guidence- 4600 Cr topline while volume growth would be 20%.
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Realization will drop because majority of Domestic biz comes from EV wheels which are high volume and low value biz (Revenue per wheel is less).
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EBITDA M per wheel will go up by 15%.
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290 cr of exports will be 600 cr in FY24.
I am new to investing and hence i could be asking a very basic question, but I hope the members here would bear with my lesser understanding.
After going through the financials, i am intrigued by the low margins of this company. The PAT is in the range of ~4-5% and the operating margin is in the range of ~10%. And this pattern is repeating and not limited to one or two years.
I understand that the alloy business is going to be more profitable, but the bulk of business would still be steel wheels.
With a good established product and large market share, should it not be higher?
Margins are fixed with OEMs, they do not have pricing power. Price depends on the Input Cost
Even from what I have studied the industry doesnât have a technology moat, the good companies will be the ones who can develop operational efficiency, capex and improving product mix.
SSWL for the past 2 year had been battling on 2 fronts -
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Exports - Spike in 2021 was met with a 70% drawdown in 2022 owing to interest rate hiking, overstocking and normalisation of supply chains in west. All of that has been absorbed and SSWL is back on track to match it in FY24 and surpass in FY25.
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Capacity -
2a. Alloy capacity of 3 millions wheels was fully utilised leading to a halt on revenue growth on Alloys as demand outstripped capacity (Order book full till 2026). Company had commenced Alloy capex of 1.8 millions wheels in 2022 and now in Aug '23 itâs going to commercialize and ramp up to 4.8m wheels at peak.
2b. Steel capacity is operating at 70% utilization and AMW acq. is going to bring more capacity and more machinery for CV and other plants.
Both of these factors had led to muted growth in 22-23 as exports revenue declined (830 cr â 300 cr) but was compensated by domestic revenue growth.
3 triggers that should materialize soon -
- AMW acquisition.
- Alloy capacity commercialization.
- New client win (as per Q1FY24 concall itâs a top OEM)
Optionalities available - 2W EV motor controller biz and New import substitution product launch.
EBITDA Margin has been tricky as it has ranged between 11-12% while it shouldâve been higher as Alloy and exports both have higher margin (15%+) and they together make up 30%+ of revenues. Management has argued that its due to increase in R&D employee cost (60 employees) + ESOP costs and other factors. I expect margins to expand to 12-13% slowly on account of increasing Alloy share and cost rationalisation (Automation, operating leverage etc)
Overall the management is ambitious with aim of becoming the lowest cost wheels manufacturer in the world with good quality wheels. They aim to reach 10 million alloy wheels capacity in next 4-5 years (Currently at 3m, expanding to 4.8m in August).
Management has undertaken steps to improve ROE/ROCE by focusing on taking only good margin biz (recently they have let go of a 4-5% margin biz which had led to a revenue hit). Also focusing on cost rationalisation and companyâs capital structure (paying down debt, automation, entering higher margin biz)
At the end of day, SSWL is a commodity converter with some tech involved but it has been able to scale its capacity and revenues while maintaining quality and margins with top OEMs in its clientele to have 50% market share in domestic steel wheels and No.1 alloy wheels player in India.
