Buy Timken India Ltd For Target Rs.3560 - ICICI Direct
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Excellent set of operational numbers...
About the stock: Timken India is into manufacturing, distribution and sale of antifriction bearings, primarily tapered roller bearings, cylindrical roller bearing and other bearing components and accessories.
* They are also in power transmission product brands & partner with renewable energy companies to power some of world’s largest wind mills
* Timken offers products to defence, mining, aerospace, agriculture, rail, energy and automotive industry
* It has state-of-the-art manufacturing plants in Jamshedpur in Jharkhand and Bharuch in Gujarat
* It has a revenue breakup of 75% from domestic sales and 25% from export
Q1FY23 Results: Timken reported excellent Q1FY23 results.
* Revenue for the quarter came in at | 699.2 crore, up 49.4% YoY & 4.8% QoQ (vs. I-direct estimate of | 697.9 crore)
* Absolute EBIDTA came in at | 171.6 crore, down 4.6% QoQ (I-direct estimate of | 174.4 crore)
* Tracking its operating performance, Timken ended the quarter with PAT of | 118.1 crore (vs. I-direct estimate of | 114.2crore), down 2.6% QoQ
What should investors do? Timken has a strong balance sheet coupled with decent growth prospects led by strong growth in railways, wind and exports.
* We maintain our BUY rating
Target Price and Valuation: We value Timken at | 3560 i.e. 50x P/E on FY24E EPS
Key triggers for future price performance:
* Announcement of 400 Vande Bharat train, 90,000 wagons in next 3 years
* Recovery in Indian economy led by mining and industrial segment
* Strong capex cycle, strong traction from wind and services segment
Alternate Stock Idea: We also like SKF in our capital goods coverage
* It is one of the leading bearing manufacturers known for its deep groove ball bearings and has a presence across the industrial & auto sector.
* BUY with a target price of | 4920 i.e. 40x P/E on FY24E EPS
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