FAG Bearings - 4QCY2012 Result Review - Angel Broking

FAG Bearings (CMP: Rs. 1,396/ TP: Under Review/ Upside: -)

FAG Bearings (FAG) posted extremely poor results for 4QCY2012 owing to sharp deterioration in EBITDA margins which declined 591bp yoy (258bp qoq) mainly led by raw-material cost pressures.

For 4QCY2012, FAG's top-line stood flat (down 2.5% qoq) at Rs. 347cr, which was lower than our expectations of Rs. 369cr. The top-line performance was impacted by a slowdown in the automotive and industrial sectors which are the primary drivers of the company's revenues. The operating profit fell significantly by 33.4% yoy (19.9% qoq) as margins registered a sharp fall led by raw-material cost pressures and lower operating leverage. While, the raw-material cost as a percentage of sales surged 389bp yoy; employee expenditure as a percentage of sales jumped 90bp yoy during the quarter. Led by a weak operating performance, the net profit declined 30.9% yoy (19.6% qoq) to Rs. 30cr, lower than our expectations of Rs. 39cr. At the CMP of Rs. 1,396 the stock is trading at 10.5x its CY2014E earnings. We maintain our Buy rating on the stock; however our target price is under review.

Source : Equity Bulls

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