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Steel Strips Wheels Limited (SSWL) reported Q2FY26 Revenue of INR1,201 crores, marking a 9.6%YoY increase. Despite healthy top-line growth, profitability was severely constrained, with EBITDA declining 6.5% YoY to INR111 crores. Consequently, the EBITDA margin compressed significantly from 10.9% in Q2FY25 to 9.3% in Q2FY26. PAT witnessed a steeper decline of 22.7% YoY, settling at INR36 crores, resulting in a PAT margin of 3.0% (down from 4.2% in Q2FY25). The severe margin contractions were primarily driven by slowdown in exports,a typically high-margin segment,which recorded a 26% decline in revenue during the quarter. This volume drop resulted in an estimated margin loss of INR 8 crores to INR 9 crores due to lost U.S. sales volume, causing the EBITDA per wheel to drop to INR 242 in Q2 (from INR 262 in Q1). Furthermore, the margin percentages were impacted by rising input costs, specifically the increase in aluminium prices from approximately INR 225/kg to INR 265-270/kg.

Segment wise Performance Overview:

i. Alloy Wheel Segment: Contributed 36% to revenue with 18 to continue rising.

ii. Aluminium Knuckles Segment: Sold 1.24 lakh units, generating INR 33 crores in H1, with capacity expansion plans to 0.5 million units by year-end and FY '26 revenue target of INR 75- 80 crores.

iii. Exports: Revenue declined 26% YoY to INR 111 crores due to U.S. tariff challenges, with a margin loss of INR 8-9 crores in Q2.

Domestic Market Outlook

The domestic market outlook is positive, supported by recent GST reforms and the ongoing festive momentum, which is boosting demand across several segments. Two-wheelers are experiencing strong demand, while PVs are expected to see an 8% to 10% increase over the next 3 to 5 months, with a target of 3% to 4% annual growth. The tractor segment is also growing well, with full-year volume growth projected at 8% to 10%. However, the CV segment remains subdued, with only a slight 2% growth expected for the year, likely due to competition from railways.

Export Performance and Rising Focus to Europe

SSWL's export performance faced pressure, primarily due to stringent U.S. tariffs, which resulted in a significant margin loss up to INR 20 per wheel. To mitigate this, the company has ncreased its focus on Europe, where export share grew to 52% in H1FY26, up from 32% in FY25. The European market has shown stable demand, with multiple new programs launched, and efforts to offset the export loss are ongoing, despite the challenge of compensating for a projected INR 200 crores loss. Additionally, management is exploring European acquisitions, focusing on collaborative efforts and targeting discounted assets to build capabilities where necessary, as Indian manufacturing remains competitive.  

Capacity Expansion and CapEx Update

SSWL is advancing capacity expansion focusing on alloy wheels and knuckles, targeting a total capacity of 1 million knuckle units by 2026. Alloy wheel utilization is expected to reach 80%-85% in the next 7-8 months, prompting further capacity assessments. The company has also expanded its steel wheel production by 40% in the tractor segment and is adding 0.5 million units in Jamshedpur for CVs. For FY '26, SSWL plans a total CapEx of INR 250 crores, with a significant portion directed towards knuckles (40%-50%) and alloy wheels (30%-40%). Key investments include INR 88-90 crores for 1 million flow-formed wheels and INR 30 crores for upgrading the paint shop, positioning SSWL for growth and global competitiveness.

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