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In Q3 FY25, SSWL's revenue fell to 10,747 Mn, down 3.2% YoY and 1.9% QoQ, driven by weaker demand in CV and exports, particularly in H1 FY25. Despite this, 9M FY25 revenue was 31,951 Mn, down 2.8% YoY, with EBITDA improving to 1,177 Mn at an 11% margin, up from last year's 10.5%, due to cost efficiencies. PAT, however, decreased to 477 Mn (-19.7% YoY), missing out on last year's tax benefits. Increased capital expenditure for alloy wheel expansion led to higher depreciation at 754 Mn in 9MFY25. On a brighter note, export revenue soared to 404 Mn with a 228% YoY increase, signalling robust growth potential for the rest of FY25.

Segmental Performance

The segmental performance in alloy wheels for passenger vehicles suggests a shift in consumer preference towards premium products. The alloy wheel segment grew by 11% in terms of contribution to the company's portfolio as of 9MFY25. The tractor segment's impressive growth, with an expected 20% increase in overall sales this year, underscores SSWL's competitive edge in niche markets. Conversely, the dip in the CV segment highlights vulnerabilities to economic cycles, necessitating a strategic pivot towards more stable or growing segments. However, recovery is expected by the management in this segment, driven by increased government spending on infrastructure and mining projects.

New Product Launch - Aluminium Knuckles

SSWL's launch of aluminium knuckles, starting with 2.5 lakh units p.a., marks a strategic shift to high-margin, lightweight components. Production starts Q3 FY25, aiming for 14-15 crores this year and 105-115 crores in FY26 at current capacity with double-digit margins, potentially reaching 180 crores with expansion. Capacity will double by Q4, boosting portfolio and profitability. With the EV market set to grow in India, demand is expected to rise. Key metrics include 65% capacity utilization by Q4 and a 2 million capex by mid-February. SSWL is also in talks for seven RSQs across electric and ICE platforms, benefiting from the steel-to-aluminium knuckle transition

Alloy Wheels & Export Growth

SSWL is set to expand its alloy wheel production to 4.85 million units by FY26, leveraging both domestic and international markets amid potential US political stability that could increase orders due to new tariffs on China, favouring Indian suppliers. Despite a dip in H1FY25 export revenues the outlook is optimistic with expected growth in exports, as the reduction in raw material costs supports fulfilling export orders efficiently, along with a 40-50% growth in the alloy wheel segment next year. The company forecasts export revenues of INR 550-600 crores for FY25, with a long-term goal of reaching INR 1,000 crores over the next 3-4 years, propelled by established customer relations and new product lines in alloy and agricultural wheels. Europe, while growing, remains a secondary market compared to the US.

Outlook & Valuation:

The company is poised for growth with strong demand in its new aluminium knuckle business and expanding international markets. The shift towards high-margin alloy wheels, increased exports, and improved cost efficiencies will drive performance despite CV sector challenges. We expect Volume/Revenue/EBITDA to rise by 9%/13%/36% in FY26(E). We maintain HOLD rating with a target price of INR 232, valuing the stock at 22.3x FY26(E) EPS and 10.4x FY26(E) PE

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