Sterling Tools Q3 Review – Focused On Diversification: Dolat Capital

Paul Walker

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Sterling Tools Ltd. reported weak set of numbers in Q3 FY22. Net revenue de-grew 10% QoQ to Rs 1.15 billion dragged by slowdown in two-wheeler volume, partially offset by recovery in commercial vehicles volume.

Ebitda margin stood at 14.3% (down 247 basis points QoQ), impacted due to high fuel and logistic cost. We expect margin pressure to ease out in FY23 with passing of raw material cost and benefits of operating leverage kick in.

We expect due to its long-term relationships with top original equipment manufacturers, such as Maruti Suzuki India Ltd., Tata Motors Ltd., Honda Motorcycle and Scooter India Pvt. Ltd., Hero MotoCorp Ltd., Mahindra and Mahindra Ltd., Ashok Leyland Ltd., Fiat and Daimler, Sterling Tool will emerge as the key beneficiary of revival in automotive volume of OEMs.. Moreover, reduction in Import volumes coupled with localisation push will propel revenue growth.

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