Accumulate Sterling Tools; target of Rs 234: Dolat Capital

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26 Aug, 2025 12:21

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Dolat Capital's research report on Sterling Tools

Sterling (STL) reported weak results in Q4FY19. The revenue/EBITDA fell 10/22% YoY in the quarter, due to the slowdown in the automobile segment (especially CVs). The EBITDA margins was 13.7% (-205bps YoY/-77bps QoQ), on account of a weak product mix, commodity inflation, and negative operating leverage. Given the overall tepid demand for vehicles, higher inventory levels with dealers, and production cuts by the OEMs, we believe STL will likely remain under pressure for Q1FY20. However, we expect earnings will improve from Q2FY20, due to pre-buying on account of BS VI and a likely revival in economic activities.

Outlook

As STL focuses on specialized fasteners and the new manufacturing facility in Kolar becomes operational, we expect the margins to recover in coming quarters. We recommend Accumulate, with a TP of ` 234(based on 16xFY21E EPS).

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