Sterling Tools hits new high; stock soars 60% in 3 weeks post Q1 earnings

The strategic alliance with Yongin Electronics, a supplier of components to the Hyundai Kia Motor Group, is projected to yield a substantial biz volume of Rs 250 crore over the next five years.

Shares of Sterling Tools (STL) hit a new high of Rs 575, surging 9 per cent on the BSE in Tuesday’s intra-day trade on expectation of strong earnings going forward. The stock of the auto parts and equipment company has surpassed its previous high of Rs 555.35 that it touched on August 20, 2024.

In the past three weeks, the market price of STL has zoomed 60 per cent, after the company reported strong results for the June 2024 quarter (Q1FY25).

The company reported a 40.9 per cent year-on-year (YoY) growth in profit after tax (PAT) at Rs 18.4 crore in Q1FY25, as compared to Rs 13.1 crore in Q1FY24.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) margin improved to 13.1 per cent in Q1FY25, compared to Ebitda margin of 12.4 per cent in the corresponding quarter last year.

Sterling's revenue grew 27.3 per cent YoY to Rs 283.70 crore during the period under review, primarily driven by good demand in its two-wheeler business and stable demand in the passenger vehicle segment.

STL manufactures high tensile cold forged automotive fastener solutions for passenger car, two wheeler, commercial vehicle, agri-equipment and construction equipment segments. 

It is the second largest automotive fastener manufacturer in the country and its wholly-owned subsidiary, Sterling Gtake E-Mobility Limited (SEGM) is the largest Motor Control Unit (MCU) manufacturer for the Electric Vehicle (EV) industry in India.

The client portfolio of the company includes leading incumbent and start-up original equipment manufacturers (OEM).

The company’s successful foray into manufacturing MCUs for EVs has provided it with a solid foundation and helped it develop competencies that will be required to capitalize on the emerging trends in Autonomous, Connected and Electric (ACE) mobility.

Looking ahead, the company plans to expand its portfolio to include other e-mobility solutions products, such as powertrains and power electronics, aiming to further leverage opportunities presented by the growing demand for electric and sustainable transportation solutions.

This EV-centric expansion strategy aligns with market trends and also positions the company to cater effectively to the evolving needs of its customers in the automotive sector.

STL has formalised a memorandum of understanding (MoU) with Yongin Electronics Co. Ltd., a supplier of components to the Hyundai Kia Motor Group based in South Korea.

This strategic alliance is projected to yield a substantial business volume of Rs 250 crore over the next five years, the company said in its FY24 annual report.

In line with this collaboration, STL is poised to establish a state-of-the-art greenfield manufacturing facility.

Further, the MoU signifies a significant advancement for STL, as it augments the company's capacity to deliver tailored solutions catering to the EV and Hybrid segments, alongside other automotive applications.

As STL leverages Yongin’s cutting-edge technology, the partnership is expected to fortify Sterling’s position within the automotive industry, the company added.