IGI Logo

Strong performance but expensive valuations...

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

Q1FY22 Results: Timken reported robust Q1FY22 results.

* Revenue for the quarter came in at | 467.9 crore, up 192% YoY & down 1.6% QoQ (vs. I-direct estimate of | 380.9 crore)

* Absolute EBIDTA came in at | 92.8 crore, up 6.8% QoQ (I-direct estimate of | 60.6 crore)

* Tracking its operating performance, Timken ended the quarter with a PAT of | 56.7 crore, up 7.2% QoQ

What should investors do?

Timken has a strong balance sheet coupled with decent growth prospects but this is reflected in the price.

* We continue to maintain out HOLD rating on the stock

Target Price and Valuation: We value Timken at | 1740 i.e. 40x P/E on FY24E EPS

Key triggers for future price performance:

* Acquisition at parent level and introduction of those products in India

* Strong rebound in CV cycle

* Higher exports of Timken branded products from the Bharuch plant

* Superior RoIC trend of >25%

Alternate Stock Idea: Apart from Timken, we also like NRB Bearings in our capital goods coverage universe.

* It offers a play on needle roller bearings, which are largely used in auto applications

* BUY with a target price of | 175 per share

To Read Complete Report & Disclaimer Click Here

https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

Above views are of the author and not of the website kindly read disclaimer