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Buy NRB Bearings; target of Rs 215: ICICI Direct

February 12
04:25 2019

ICICI Direct’s research report on NRB Bearings

NRB Bearings reported mixed Q3FY19 numbers. The company reported in line topline numbers, albeit with lower margins (other expenses increased 38.1% YoY). Revenues came in at Rs 242.6 crore, up 16.7% YoY. We estimated revenues of Rs 242.4 crore. We believe strong topline growth was on account of robust performance across all segments i.e. domestic OEMs, after-markets and exports • EBITDA increased 3.7% YoY to Rs 42 crore. The company reported lower EBITDA as other expenses increased 38.1% YoY. Gross margin declined marginally by 50 bps YoY. EBITDA margins came in at 17.3% vs. 19.5% YoY. • Tax rate for the quarter was at 15.5% vs. 33.6% YoY. Accordingly, PAT grew 25.7% YoY to Rs 26.8 crore.

Outlook

NRB has been delivering strong double digit topline growth from past six quarters. Going forward, we expect NRB’s key segments – domestic OEMs, after markets and exports to grow at a healthy rate of 12.7%, 13% and 18% respectively. Accordingly, revenue, EBITDA and PAT are expected to grow at 14.5%, 13.3% and 13.8% CAGR, respectively, in FY18-21E. Capex plans of ~Rs 150 crore over the next two years are also on track for the company. It has also planned a capex of ~Rs 20 crore for SNL Bearings. We expect borrowings in the range of Rs 230-250 crore by FY19E. We maintain our positive stance on the company and value it at ~16x FY21E to arrive at a target price of Rs 215 per share. We have a BUY rating on the company.

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