Steel Strip Wheels manufactures wheels of high quality and high safety standards since a long time. They make wheels for Cars, MUVs, Trucks etc. Recently the company has been performing extremely well and they are getting a lot of export orders for wheels. As their website says, they are becoming a reputed global player in wheels manufacturing. They have 2 production plants setup already that has the capacity of making 10M wheels and another one is being setup in Jamshedpur that will produce 1M wheels only for trucks.

Fundamentals

If we talk about the financial health of the company, then from FY05 to FY10, the sales turnover has gone up from 150 crores to 420 crores and operating profit has risen from 27 crores to 62  crores. In the last few quarters, they are doing exceptionally well, sales have almost doubled in the last one year and profits have risen 3 times.This kind of growth is excellent and the company expects to keep improving these figures. The recent export orders will also help drive the profit growths of the company. The stock has been reacting to it’s numbers well. In the last one year, the stock has rallied almost 5 times, from levels of 75 to 375. I expect the company to continue to do well and if the company will continue to perform well, then the stock prices will also continue to spike up. Today when the market was on a sharp decline mode, this stock still managed to keep up the 10% rally.

Attractive Stock

Another thing I wanted to say about the company is that in terms of Market Capital, the stock is looking extremely attractive. Don’t bother with the stock price but see the market capital. It’s market capital is 500 crores as of today and the operating profit registered for Q1 FY11 is 20 crores and net profit is 7.22 crores. The company should continue to post bigger numbers in coming quarters but even then if we assume that company posts the same profit in coming quarters, that means we expect 80 crores of operating profit and 29 crores of net profit for the year FY11. Then the operating profit is 16% and net profit is 6% of the market capital. The gap between operating profit and net profit is due to high depreciation cost, which isn’t actually the amount of money that goes off your hands. If we remove the depreciation numbers from net profit, then profit comes to 14 crores, close to 12%  returns on profit after tax and interest payments. These figures speak volumes about the company and with the same kind of performance the stock should touch new highs, forget about where the stock can head to if the profits rise exceptionally.

Buy Steel Strips Wheels with a long term view, you will make super profits in this stock.

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