Detailed Narrative
Strong Domestic Performance Drives Q3 Growth
Steel Strips Wheels Ltd. reported a robust Q3 FY26, with revenue growing 23% year-on-year to Rs. 1,321 crores, and 16% for the nine months to Rs. 3,708 crores. This growth was primarily fueled by healthy domestic demand across the CV, tractor, and passenger car segments, supported by record monthly sales in November and December. Management highlighted the resilience of their diversified approach and the positive impact of recent GST reforms on consumption.
EBITDA Per Wheel Improves Amidst Margin Pressure
While Q3 FY26 EBITDA grew 8.5% year-on-year to Rs. 128 crores, management emphasized that EBITDA per wheel is the more relevant profitability metric. This metric improved to Rs. 260 in the current quarter, up from Rs. 240 in the previous quarter. The improvement is attributed to continued focus on premiumization, operational excellence, and higher capacity utilization, which helped offset the impact of increasing raw material prices, which are a pass-through to customers.
Aluminum Segment Outperforms, Knuckles Gaining Traction
The aluminum segment was a standout performer for the nine months, contributing approximately 37% to total revenue and 20% in volume terms. The company expects to reach an annualized capacity of 5 million aluminum wheels by March 2026. The aluminum knuckle segment also showed strong momentum, generating approximately Rs. 54 crores in revenue and targeting an annual capacity of 5 lakh units by the end of FY26, with a planned scale-up to 11 lakh units by FY27.
Strategic Capacity Expansion in Bhuj
The company is undertaking a significant capacity expansion in Bhuj, utilizing the acquired AMW factory, with a total investment of approximately Rs. 420 crores for new aluminum wheels and knuckles facilities. An additional Rs. 40 crores is allocated for brownfield maintenance CAPEX. This expansion is expected to add 1.2 million units of aluminum wheels and 0.6 million units of knuckles, targeting peak revenues of Rs. 600-700 crores from wheels and Rs. 200 crores from knuckles. Commissioning is anticipated around Diwali 2026, with commercial supply by December 2026.
US Export Challenges and Diversification to Europe
The high-margin US export business was significantly impacted by Trump tariffs, resulting in a compromise of Rs. 300-400 crores in revenue. In response, the company has diversified its export base, with Europe now accounting for over 58% of its export revenue, driven by OEM sales. Management anticipates a resolution to the US tariff situation within 3-6 months, which could potentially add Rs. 500 crores in additional revenue from the American market.
Bullish Outlook with FY27 Revenue Target of Rs. 6,000 Crores
Management expressed a bullish outlook for the coming quarters and FY27, targeting a 20% revenue growth and a turnover of Rs. 6,000 crores, even without the resolution of US tariffs. If tariffs normalize, the turnover could reach Rs. 6,500 crores. They also project an EBITDA per wheel of Rs. 270 for Q4 FY26 and 'definitely better' for FY27, driven by strong order visibility across key domestic segments and diversified presence.