Studds Accessories Limited (Subscribe)

Highlights

Studds Accessories Limited (SAL) incorporated in 1983, is engage in the business of designing, manufacturing, marketing and selling two-wheeler helmets under the STUDDS and SMK brands and other accessories (such as two-wheeler luggage, gloves, helmet locking device, rain suits, riding jacket and eye wear) under STUDDS brand.

SAL directly sell their products to reputed two-wheeler OEMs, such as Honda Cars India Limited, Hero MotoCorp Limited, Suzuki Motorcycle India Private Limited, Eicher Motors Limited (Royal Enfield) and India Yamaha Motors Private Limited.

SAL products are sold pan-India and in 70+ countries internationally, with key export markets situated across Americas, Asia (excluding India), Europe and rest of the world. They also manufacture helmets for Jay Squared LLC, which are sold under the Daytona brand in the United States of America, as well as for O’Neal under their branding, supplying to markets in Europe, United States of America and Australia.

With nearly 5 decades of experience, SAL holds market share of 27.30 pct in terms of volume and 25.50 pct in terms of value, in the domestic market in FY24. Over the time, SAL’s consistent focus on improving the safety features and quality of their helmets have helped them in establishing their brands.

Out of the total proceeds of approximately Rs. 4,555 mn, ~Rs. 4,555 mn would go to the existing promoter selling shareholders and other selling shareholders of the company. As the company expects that listing of the Equity Shares will enhance their visibility and brand image and provide liquidity.

Key Highlights

• The Indian 2W industry showed steady growth in the past years, from 13.8 mn units in FY13 to 21.2 mn unit sales in FY19. The 2W domestic sales volume is expected to grow by 7-9 pct in FY26, Further, the 2W auto domestic sales are expected to grow with a CAGR of 5 pct-6 pct over the period of FY25-30. Additionally, the market for helmets is anticipated to expand at a CAGR of 6.1 pct in volume and 8.7 pct in value between CY24 and CY29.
• SAL manufacture their products under 3 facilities which has combined total installled capacity of 9.04 mn units and capacity utilization of these facilities are above 75 pct in last 3 years. Further, SAL intend to expand their production capabilities for manufacturing 2W helmets and accessories and bicycle helmets, which is expected to be completed and commissioned in FY26 and will add ~3 mn units capacity in phased manner.
• SAL’s STUDDS brand came in 1975 and currently they are selling about Rs. 875 – Rs. 4,000 catering to mid and mass market segment while their SMK brand came in 2016 and currently selling about Rs. 3000 – Rs. 12,800 which caters to premium segment. However, SMK brand in Europe, US considered as low – mid market.
• The company offer a wide and diversified portfolio of helmets and motorcycle accessories catering to mass commuter and premium. Additionally, they are offering various add-on features like Bluetooth and GPS.
• SAL’s large distribution network, which includes domestic distributors, importers and two-wheeler OEMs, allows them to expand geographical reach without incurring significant capital expenditure. Further, most of the orders placed by the distributors are backed by weekly credits and all the orders placed by importers are usually backed by advance payments or letter of credit, which allows SAL to have efficient working capital.
• SAL’s key strategies includes (i) Expand and strengthen production capacity and deepen vertical integration (ii) Strategically expand into new markets and geographies (iii) Increase offering in the premium helmet segment in the STUDDS and SMK brand (iv) Expand product portfolio (v) Increase focus on domestic online sales channel.
• Sales of the company has grown by 8.1 pct CAGR over FY23-25 and EBITDA and profit grew by 32.1 pct CAGR and 44.9 pct CAGR over same period. During FY25 the sales of the company grew by 10.4 pct YoY to Rs. 5,838 mn. While EBITDA of the company rose by 16.2 pct YoY to Rs. 1,048 mn and EBITDA margin expanded by 90 bps bps YoY to 18 pct in FY25. During FY25, the company posted profit of Rs. 696 mn, which jumped 21.7 pct YoY.

Key Risk

• Sales of the company mostly dependent on sale of motorcycle, any decrease in motorcycle sales could have an adverse effect on SAL business.
• In the past, for instance designs for their products, such as, Stellar – Wings were not well received by customers FY25, FY24 and FY23 and if they are unable to provide new designs or update product catalogue in accordance with customer preference, it may adversely affect their business.
• SAL’s business is subject to seasonality. Lower revenues in the second quarter of any Fiscal may affect their business.

Financial Performance

Valuation

Studds Accessories Limited (SAL), with it 5 decades of experience, dominated Indian Helmet industry, claiming 27.3 pct market share in Volume terms and 25.5 pct market share in value terms. Standard helmets are replaced every 3-4 years, premium ones last 6-7 years while 2W lifecycle is around 15 years. This translates to 3x Helmet Buying can be seen over the 2W lifecycle. At the upper end of the price of Rs. 585, the issue quotes a PE of 28.5x on FY25E post issue annualized earnings. One can subscribe this issue from a longer-term perspective.

Disclaimer: The views shared in blogs are based on personal opinions and do not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Advisor before making any investment using the app. Making an investment using the app is the investor’s sole decision, and the company or its communication cannot be held responsible for it.