WHEELS INDIA LTD - Q2 FY18

Wheels India Ltd reported robust yearly numbers for second quarter FY18 on the back of higher revenue and strong operational efficiency. Revenue rose 3% YOY from Rs. 5886 Mn in Q2 FY17 to Rs. 6048 Mn in the current quarter. EBDITA was on a strong footing, rising 16% YOY and 9% sequentially. EBDITA was reported at Rs. 523 Mn against Rs. 451 Mn same period previous year. PAT stood at Rs. 264 Mn compared to Rs. 124 Mn in Q2 FY17. PAT zoomed 113% YOY and 103% QOQ impacted by exceptional item of Rs. 125 Mn in the current September quarter. Exceptional item represents slump sale of its passenger car steel wheel business to its subsidiary WCWL. WIL Car Wheels Ltd (WCWL) is a joint venture between Wheels India and Topy Industries, leading Japanese car wheel manufacturer. In this respect, Profit before exceptional item would be a better measure of profitability which has grown 37% YOY and 20% sequentially. Profit before exceptional item & Tax stood at Rs. 238 Mn for the quarter against Rs. 173 Mn corresponding quarter previous year. Strong revenue & other income growth and higher operational efficiency as operating cost grew just 2% YOY has led to strong EBDITA margins for the quarter. EBDITA Margin stood at 8.65% rising 99 basis points YOY and 81 basis points sequentially. One basis point is one 0.01%. Net Profit Margin was reported at 4.36% compared to 2.11% same period previous year. Other Income stood at Rs. 19.40 Mn multiplying 3 times YOY and rising 39% QOQ in the current September quarter. 

Wheels India is a leading manufacturer of steel wheels for passenger cars, utility vehicles, trucks, buses, tractors & construction equipment. Apart from wheels other company divisions are air suspension, energy equipment & heavy engineering division. The company has a diversified customer base with over 40 customers spread globally such as Japan, Korea, US,  Brazil, China to name a few. About 80% of the business comes from domestic Indian market. The company has manufacturing plants at Padi, Rampur, Sriprambudur and Pant Nagar with annual capacity of 10 million wheels. We recommend BUY for the stock for medium & long term investment with a target price of Rs. 2055. 

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