This auto component maker's stock jumped 8%; what is boosting the rally?

Sterling Tools share price: Shares of auto component maker Sterling Tools Limited (STL) rose as much as 8.42 per cent to hit an intraday high of Rs 595 per share on Tuesday, November 19, 2024. 

 

The rise in Sterling Tools share price came after the company revealed that it has been awarded the long-term rating of [ICRA]AA- (Positive), from [ICRA]AA- (Stable). 

 

The upgrade highlighs STL’s robust credit profile and major growth in its electric vehicle (EV) components segment, which has diversified its revenue streams. 

 

Moreover, the company has maintained a strong market position in the fastener industry despite stiff competition from both organised and unorganised players. Its wholly-owned subsidiary, Sterling Gtake E-mobility Limited (SGEM), has achieved a notable early-mover advantage in the EV sector, particularly in supply chain management and technical expertise. This positions STL favourably for future growth, driven by the increasing penetration of EVs.

 

STL reported a healthy earnings before interest, tax, depreciation and amortisation (Ebitda) margin of 14.7 per cent for FY24, supported by strong earnings and comfortable debt metrics. SGEM, a key driver of STL’s EV-focused growth, captured 40 per cent of the high-speed electric scooter market and secured a 30 per cent share in the broader electric two-wheeler (e-2W) market during FY24. 

 

To meet rising demand, SGEM expanded its annual production capacity of motor control units (MCUs) from 4 lakh to over 6 lakh units. The subsidiary’s revenue prospects are further bolstered by the Indian government’s push to promote EV adoption.

 

Additionally, STL’s strategic investments in innovation and product development have increased its share of business (SoB) with leading automotive OEMs across India. The company’s medium-term revenue growth is expected to be driven by sustained EV demand, a growing customer base, and robust sales volumes and realisation

 

Set up in 1979, Sterling Tools Limited (STL) manufactures high tensile cold forged automotive fasteners, solutions catering to the passenger cars, two wheelers, commercial vehicles, agri-equipment and construction equipment segments. 

 

STL, through its subsidiary, has also ventured into sunrise sectors such as Electric Vehicle (EV) components to ensure robust value creation for its stakeholders. 

 

At 2:18 PM, Shares of Sterling Tools were trading 4.13 per cent higher at Rs 571.40 per share. In comparison, BSE Sensex was trading 1.13 per cent higher at 78,215.85 levels.