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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, Jharkhand and Bharuch, Gujarat

* It has a revenue breakup of 75% from domestic sales and 25% from export

Q2FY22 Results: Timken reported decent Q2FY22 results.

* Revenue for the quarter came in at | 557.9 crore, up 42% YoY & 19.3% QoQ (vs. I-direct estimate of | 540.4 crore)

* Absolute EBIDTA came in at | 123.8 crore, up 33.5% QoQ (I-direct estimate of | 96.4 crore)

* Tracking its operating performance, Timken ended the quarter with a PAT of | 79.2 crore (vs. I-direct estimate of | 59.7 crore)

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 our HOLD rating on the stock

Target Price and Valuation: We value Timken at | 2240 i.e. 45x P/E on FY24E EPS

Key triggers for future price performance:

* Recovery in Indian economy led by mining and industrial segment

* Strong rebound in CV cycle

* 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

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