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NRB Bearings - Fundamental Call - Consortium
Posted On : 2013-01-30 21:54:08( TIMEZONE : IST )
NRB Bearings posted decent set of Q3 numbers were in line with expectations on revenue front and stood better on margin front. Revenue grew 4.8% YoY (-3.3% QoQ) to Rs 1,44.2 crs led by growth in passenger car and two-three wheelers segment, growth in after-market segment (~10% YoY) and strong growth in exports (~65% YoY) partially offset with de-growth in commercial vehicle and tractor segment and demerger of industrial business - NIBL from 3QFY13. However, results are incomparable on yearly as well as sequential basis due to demerger of industrial business.
EBITDA margin, though dropped 280 bps YoY, has improved 100 bps QoQ to 17.2% due to reduction in employee expense (as expected) after demerger of NIBL. YoY drop in EBITDA margin is attributed to increase in RM cost (370 bps YoY including consumption of stores, adjusted for regrouping of consumables and processing charges into other expense from 4QFY12). However, results are incomparable on yearly as well as sequential basis due to change in product and business mix led by demerger of industrial business.
Other income of the company has gone up from Rs 0.2 crore to Rs 1.6 crore due to forex gain (on forward booking of exports receivables) of Rs 1.6 crore as against nominal forex loss during 3QFY12. Though interest expense and depreciation have gone up due to capacity ramp-up, Higher other income and write-back of tax (due to prior period tax adjustment on tax benefit for 9MFY13 taken on Pantnagar facility) supported the margins. NPM of the company stood at 10.2% as against 9.0% during 3QFY12.
Diverse presence in automotive segment, exports and after-market segment provides de-risked business model to NRB. We believe that growth in after-market and exports, improvement in tractor segment and recovery in passenger cars with reversal of interest rate cycle would support the growth momentum for the company. At the current market price of Rs 35, the stock is trading at 7.9x FY13E and 5.9x FY14E ex-NIBL EPS of Rs 4.5 and Rs 6.0, respectively. We continue to remain positive on the stock and maintain Buy rating with the target price of Rs 42 (based on 7x FY14E ex-NIBL earnings).
