Company Overview:
Studds Accessories Limited, a premier Indian manufacturer, stands as a global leader in the production of helmets and motorcycle accessories. The company has achieved the distinction of being the largest two-wheeler helmet manufacturer worldwide, with an annual production exceeding 7 million helmets and more than 1 million motorcycle accessories in FY24 across its four advanced manufacturing facilities. Holding approximately a 30% market share in India, Studds has expanded its influence well beyond domestic borders, exporting to over 70 countries across Europe, Asia, America, Australia, and the Middle East.
Key Performance Indicators:
- Revenue Growth: The company’s total revenue for FY24 reached ₹529 Cr, up from ₹491 Cr in FY23, showcasing consistent growth.
- EBITDA: FY24 saw EBITDA rise to ₹97 Cr, improving from ₹67 Cr in FY23.
- PAT: Profit After Tax (PAT) for FY24 increased to ₹57 Cr from ₹33 Cr in FY23.
- EPS: Earnings Per Share (EPS) for FY24 was ₹29.08, a significant increase from ₹16.90 in FY23.
- Net Worth: The company's net worth grew to ₹387 Cr in FY24, up from ₹337 Cr in FY23.
Revenue Bifurcation: Domestic vs. Export
Total Revenue for FY24: ₹547 Cr
- Inland (Domestic) Sales: ₹494 Cr
- Export Sales: ₹53 Cr
Analysis of Export Sales Decline:
Export sales in FY24 were notably impacted by stringent safety norms and certification requirements introduced in key European markets. This shift in regulations led to a reduction in export revenue, which fell from ₹67 cr in FY23 to ₹53 cr in FY24. The decline underscores the challenges posed by regulatory changes in international markets, particularly Europe, where compliance with the new helmet safety standards has become more demanding.
However, this downturn in export sales is expected to be temporary. Studds is actively updating its product lines to meet the new European standards and is collaborating closely with its distribution partners to ensure a smooth transition. The company remains confident that these efforts will not only bring its export sales back on track but also foster growth in the upcoming fiscal year.
Strategic Growth Drivers:
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Domestic Market Growth:
- The Indian market continues to show robust demand, driven by increasing consumer awareness of helmet safety and the implementation of stringent safety standards. Studds’ strong brand presence and extensive distribution network position it well to capitalize on these trends.
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International Expansion:
- Studds' export strategy is centered on leveraging the "China Plus One" approach, which is gaining traction among international brands seeking reliable manufacturing partners outside China. The company’s commitment to innovation and compliance with local certification requirements in international markets is expected to drive significant growth, particularly in North and South America.
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Electric Vehicle Segment:
- The rapid growth of the electric vehicle (EV) segment in India is expanding the addressable market for helmet manufacturers. Studds is strategically positioned to capture a substantial share of this new market, which is creating exciting opportunities for innovation and sales.
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Improved Margins:
- A reduction in oil prices, a key raw material for helmet production, has positively impacted the company’s margins. This cost advantage is expected to enhance profitability in the coming years.
Valuation:
To estimate the market capitalization (Mcap) and Price to Earnings (P/E) ratio, we use the following formulas:
Cash Flow Statement Analysis:
Cash Flow from Operations:
- Net Cash Generated from Operating Activities in FY24 was ₹96.59 Cr, significantly higher than the ₹28.15 Cr generated in FY23. This indicates a strong operational performance, reflecting higher profitability and efficient working capital management.
Utilization of Cash:
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Capital Expenditure (Capex):
- The company invested ₹40.73 Cr in purchasing Property, Plant, and Equipment (PPE) during FY24. This investment is a part of their ongoing strategy to enhance manufacturing capacity and maintain technological leadership in the market.
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Debt Reduction:
- The company also focused on reducing its financial liabilities. Net cash outflows related to financing activities amounted to ₹32.27 Cr, which included repayments of non-current borrowings, payment of dividends, and lease liabilities.
Conclusion:
Studds Accessories Limited is well-positioned for sustained growth, supported by strong domestic demand, strategic international expansion, and favorable market dynamics. The company’s proactive response to the regulatory changes in Europe, coupled with its focus on innovation and customer engagement, indicates a positive outlook for both short-term and long-term growth.
The valuation metrics, with a market capitalization of ₹1970 crore and a P/E ratio of approximately 34.38, reflect the market's confidence in the company's growth trajectory. As Studds continues to adapt and expand, particularly in the high-potential international markets, it remains a compelling investment opportunity in the helmet manufacturing sector.
