Steel Strip Wheels - Rs.121.00

Incorporated in 1988, Steel Strip Wheels Ltd (SSWL) is the flagship of the Steel Strips Group, which has operations in high tech manufacturing, synthetic fibre production, information technology, construction and the retail sector. SSWL is basically engaged in the manufacturing of single piece steel wheel rims in the range of 10 to 30 inches diameter for scooters, passenger, cars, utility vehicles and tractors. Ironically, there are just a dozen odd wheels manufacturers worldwide and the company enjoys a mutually beneficial partnership with Kanai Motor Wheel Company, of the Sumitomo Group, which is a major OEM supplier to Honda Motors, Mitsubishi Motors, and Fuji Heavy Industries, in Japan. Apart from breaking the monopoly of Wheels India, the company enjoys more than 50% market share in India. It has a huge clientele including all biggies like Maruti, Tata Motors, M&M, Bajaj Auto, Honda Motorcycle & Scooters, General Motors, Punjab Tractors, Eicher Motors etc. And Piaggio Vehicles, Peugeot, Rover, L&T John Deere etc are few of its international customers.

SSWL’s ultra modern manufacturing facility is spread across 28,000 sq metres of built up area within a 1,60,000 sq. metres land holding in Patiala, Punjab. Its present capacity is around 6 million wheels per year, which is being increased to 7.5 million by the end of this calendar year. To cater to the export market and the rising domestic demand, SSWL is expanding and modernizing, its huge expansion plan is to take the production capacity beyond 10 million wheels. As the southern belt of India is a strong hub for car manufactures, the company is setting up a 3 million capacity manufacturing plant for passenger cars and multi utility vehicles in Hosur near Bangalore for which it has already procured 20 acres of land. Besides, it is also a strategic location for exports due to its proximity to Chennai port. It is also putting up a joint venture company for setting up a 0.8 million capacity manufacturing plant at Jamshedpur, primarily to cater to Tata Motors growing requirement. Moreover, it has established a dedicated line for the manufacture of 1,60,000 rims per annum for 3-wheelers to be supplied to Piaggio. With Europe and North America being a huge potential market, SSWL has floated a wholly owned subsidiary in the Slovakia Republic to set up a 4.0 million capacity wheel plant. On the export front, SSWL has signed contracts with PSA Peugeot Citroen, Europe, for export of 2.25 million steel wheel rims, worth Rs.120 cr. approximately to their plants in Spain and France for their car models namely, Berlingo Citroen and 407. It has also received orders for the manufacture and export of 1,25,000 wheels for the trailer market in Germany, and 12,000 wheels for Daewoo Matiz for the replacement market in Poland. Besides it has received many enquiries from different countries such as Turkey, France, Germany, America, South Africa, Poland and Australia etc. General Motors Holden, Australia, has also awarded a contract to the company to supply steel wheels for a period of three years starting from June 2006.

With India emerging as an auto component sourcing hub and the company having ambitious expansion plans, the future looks good for SSWL. For FY06, it is expected to clock a turnover of Rs.160 cr. and NP Rs.9.50 cr., which is lower due to the rise in steel prices. But for FY07, it can report Sales of Rs.220 cr. and NP of Rs.14 cr. i.e. an EPS of Rs.12 on its expanded equity of Rs.12 cr. It has already made preferential allotment of Rs.9.10 lakh optionally convertible preferential shares @ Rs.145. As rising steel price is a bit of concern, only aggressive investors are advised to buy this stock on declines with a price target of Rs.180 in 12~15 months. Its 52-week High/Low is Rs.202/80.