Studds Accessories Limited, established in 1972, is the world's largest two-wheeler helmet manufacturer, producing approximately 7 million helmets annually. The company's laboratory in India is certified by the European Safety Agency, reflecting its commitment to quality.
**Revenue Model and Products:**
The revenue model is heavily based on helmet sales, constituting 90% of total revenue. Helmets are sold under the Studds and SMK brands, holding market shares of 25% and 27.79% respectively. Motorcycle accessories contribute the remaining 10% of revenue, primarily from the domestic market.
**Manufacturing and Capacity:**
Studds operates four manufacturing units in Haryana, employing over 3000 people. The total plant capacity is 1.35 crore helmets per year.
**Operational Model:**
Studds diversifies its revenue streams through multiple sales channels, including leveraging e-commerce platforms to expand its consumer reach. Collaboration with strategic partners and distributors globally enhances market penetration and mitigates risks associated with relying on a single sales channel.
**Raw Materials:**
Approximately 50% of Studds' raw materials are crude oil derivatives, making prices susceptible to international crude oil fluctuations. The company enters short-term contracts to mitigate price volatility. Declining crude oil prices are expected to increase margins in FY23-24.
**Offerings and Key Factors (FY23):**
Studds offers helmets, bicycle helmets, face shields/face masks, and motorcycle accessories. In FY23, the company sold more than 64 Lakhs of helmets and luggage boxes. 86.83% of total sales were from domestic markets, while 13.17% came from exports to 65+ countries. Studds has a 25.6% market share in India and is targeting 15 new countries.
**Industry Analysis:**
Helmet demand is closely linked to the purchase of new two-wheelers and replacement demand. The two-wheeler industry experienced healthy growth until FY19 but later saw a decline. ICRA projects a 6-9% growth in the Indian two-wheeler sector for FY24, returning to FY19 peak volumes within 2-3 years. The Indian motorcycle helmet market is projected to grow from INR 5000 Cr in 2022 to INR 7300 Cr by 2029, at a CAGR of 7.1%. South India holds the largest share of market distribution in 2022 segmented by region. Key players include Studds, Steelbird Hi-Tech India Ltd., Royal Enfield Helmets, and Vega Auto Accessories Pvt. Ltd. The technology segment is expected to advance from conventional helmets to smart helmets by 2029.
**Key Drivers for Growth:**
The introduction of GST, government focus on EVs and infrastructure development (FAME India, Bharatmala Pariyojana), and the Make in India initiative are expected to drive growth in the helmet industry. The government's focus on road safety also augurs growth.
**Government Regulations:**
Helmets for two-wheelers must bear the Standard Mark from the Bureau of Indian Standards (BIS) under a license as per the BIS (Conformity Assessment) Regulations of 2018, effective June 2021. Section 194D of the Motor Vehicles Act imposes a fine of INR 1,000 for riding without a helmet, with a possibility of imprisonment.
**Management:**
Madhu Khurana, Chairman and Managing Director, has over 40 years of experience. He is supported by Sidhartha Khurana, Managing Director, with over two decades of experience. Studds has established itself as a pan-India brand and has expanded its geographical footprints.
**Financials and Valuation:**
Studds' revenue increased from INR 397 Crore in FY19 to INR 506 Crore in FY23, a CAGR of 6.25%. COVID-19 impacted growth in FY21 and FY22. Profit margins were higher in FY21 due to low crude oil prices but faced pressure in FY22 and FY23 due to rising crude oil prices.
* **FY19:** Revenue - 397, PAT - 40, OPM - 18.53%, NPM - 10.20%, EPS - 20
* **FY20:** Revenue - 436, PAT - 74, OPM - 23.72%, NPM - 17%, EPS - 37
* **FY21:** Revenue - 484, PAT - 74, OPM - 23%, NPM - 15.20%, EPS - 37
* **FY22:** Revenue - 467, PAT - 28, OPM - 12.75%, NPM - 5.98%, EPS - 15
* **FY23:** Revenue - 506, PAT - 33, OPM - 13.30%, NPM - 6.50%, EPS - 17
For the current year, revenue is projected to climb to INR 550 Crore. Assuming low crude prices, a 10% net profit margin could lead to a Profit After Tax (PAT) of INR 55 Crore. The anticipated earnings per share (EPS) for FY24 is calculated to be INR 28. With a Studds share price at INR 900, the Price to Earnings (P/E) ratio is 33x, corresponding to a market capitalization (Mcap) of approximately INR 1800 Crore, which is deemed reasonable.
