Sterling Tools Hits 5-Year High, Share Surges 10% on Strong Business Outlook

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Shares of Sterling Tools rose 10% to a more than five-year high of Rs 392.60 on the BSE in intraday trade on Friday on the back of a strong business outlook. Shares of auto parts and equipment companies surpassed the previous high of Rs 390.60 on February 3, 2023. It hit an all-time high of Rs 478 on December 8, 2017.

The stock has risen 76% over the past six months, with a 1.5% decline in the S&P BSE Sensex. Moreover, it has soared 160% over the past year, compared with the benchmark index’s gain of just 0.18%.

Sterling Tools is India’s second-largest automotive fastener manufacturer, with a presence in all automotive segments and customers. It entered the electric vehicle (EV) segment in 2020 and has become one of India’s largest e-2W MCU (Motor Control Unit) suppliers. It also started supplying MCUs for light commercial vehicles.

The company reported strong growth of 64.7% in consolidated revenue at Rs 560 crore for April-December (9MFY23), compared to Rs 340.2 crore in the same period last year. The growth was primarily attributable to increased content per vehicle, overall strong industry demand and increased share of the business (SOB) for some OEMs.

The company’s consolidated profit after tax more than doubled to Rs 40.1 crore from Rs 18.7 crore a year ago. However, the EBITDA margin contracted 140 bps to 13.7% from 15.1% in 9MFY22.

The EV theme is the next big thing in the industry, and the company is well-positioned to expand its footprint in this vertical. The vertical’s turnover stood at Rs 119 crore in 9MFY23 compared to Rs 7 crore in 9MFY22.

Management said the company would continue to focus on growing sales in the EV vertical by catering to new OEMs, developing new products and improving engineering capabilities. According to management, this strategy will allow the company to expand its footprint and grab market share.

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