Q3FY21 Result Update - SKF India - ICICI Direct

SKF registered a handsome beat for Q3FY21 across all parameters. The company posted highest ever profitability led by improvement in topline and highest ever gross margins. Revenue for the quarter came in at Rs. 818.7 crore, up 15.7% YoY (vs. I-direct estimate of Rs. 781 crore). We anticipate a strong performance across the auto and industrial segment. Gross margins came in at 46.7%, an expansion of ~1230 bps. The significant jump in margins was on account of a reduction in purchase price of traded goods from group companies (in line with the transfer pricing mechanism that has been followed consistently). Following suit, EBIDTA margins came in at 22% in Q3 vs. 13.1% QoQ & 10.3% YoY. Absolute EBIDTA grew 148.6% YoY to Rs. 180.4 crore. Employee cost improved 16.6% YoY to Rs. 67.2 crore whereas other expenses registered an increase of 19.1% YoY to Rs. 134.8 crore. Consequent to the huge expansion in margins SKF reported highest every bottom-line ending the quarter with a PAT of Rs. 128.1 crore, up 150.3% YoY. Tax rate for the quarter was 26.2%.

Valuation & Outlook

Taking cognisance from the recent auto numbers and recovery in industrials, we revise our estimates upwards. We introduce FY23E numbers and pencil in 17%, 24.5% & 25.9% revenue, EBIDTA & PAT CAGR for FY21E-23E, respectively. Hence, with improved outlook and enhance visibility, we upgrade the stock from HOLD to BUY valuing the stock at 33x FY23E earnings with a target price of Rs. 2890/share (earlier Rs. 1615).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_SKFIndia_Q3FY21.pdf

Shares of SKF India Ltd was last trading in BSE at Rs.2324.5 as compared to the previous close of Rs. 2376.05. The total number of shares traded during the day was 5643 in over 1128 trades.

The stock hit an intraday high of Rs. 2377.8 and intraday low of 2270. The net turnover during the day was Rs. 13085535.

Source : Equity Bulls

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