Steel Strips Wheels Limited

Steel Strips Wheels Ltd. reported a robust Q1 FY26, with its top line growing 15% year-on-year. Gross profit also increased by 15%, and EBITDA stood at INR125 crores, marking a 6.1% year-on-year growth. Profit after tax (PAT) rose 8% year-on-year to INR50 crores from INR46 crores. However, EBITDA margin experienced a slight decline due to increased raw material prices and higher spending on spares, consumables, and repair and maintenance, which are expected to normalize^📎 in coming quarters.

The export segment delivered an outstanding performance, with revenue sharply increasing by 30% from INR123 crores to INR160 crores. The company is actively implementing a de-risking strategy, reducing its dependence on the US market, with exports to the US now at 52% compared to 70% in FY24. This shift involves a strong focus on expanding into Europe and South America, which contributed significantly to the increased turnover. Management anticipates export revenue to hover around INR600 crores for FY26, with a long-term target of INR1,000 crores over the next 3-4 years.

The alloy wheel segment within the passenger car category was a standout performer, with its contribution to overall revenue increasing from 29% last year to 35% this year. Management expects this upward trend to continue, projecting a mid-high double-digit growth for the segment in FY26. Domestic alloy wheel volumes are anticipated to grow by 11-12%, while export volumes are expected to increase by 18-20%. Alloy wheel penetration in the PV segment is currently 38-39% and is projected to reach 48-50% within the next 2-3 years.

The new aluminum knuckle segment performed well, generating INR13.2 crores in revenue from approximately 50,000 units sold in Q1 FY26. The initial capacity of 0.5 million units per annum is expected to reach 85-90% utilization by Q3/Q4 FY26. A new capacity for an additional 1 million units is being set up in Gujarat, slated for production by March or April 2026, supported by an order book of approximately 900,000 units for FY26-27. The company aims to fully launch this business line by FY26 and projects a 30-35% growth rate over the next five years.

The Commercial Vehicle (CV) segment experienced a downturn, primarily due to the introduction of AC cabins in newly manufactured vehicles starting October 1, 2025. This regulatory change led to production output adjustments and inventory control, resulting in poor sales in June. However, management expects normalcy to return from August, with AC cabin availability confirmed, and anticipates a visible ramp-up and improvement in volumes from September/October, making it a one-quarter knock-off.

The company plans a capital expenditure of roughly INR280-300 crores for the current financial year, primarily for alloy wheel and knuckles expansion. Approximately 50% of this capex will be funded through debt. The net debt position is projected to be in the range of INR850-900 crores by the year-end, with long-term debt around INR450 crores at a cost of roughly 7-7.5%. Management noted that past capex has led to higher depreciation and finance costs, impacting PAT growth, but expects PAT to grow as capex normalizes.

The company is in the process of forming a wholly-owned subsidiary in the European Union, a requirement from an OEM that awarded business a year ago. This move is part of a broader strategy to leverage cost escalations in Europe, where Indian manufacturers hold a significant competitive advantage in steel wheel production. The company recently secured a INR300 crore steel wheel business from European OEMs, further solidifying its presence in the region and reducing reliance on the US market.