Crisil Research maintains 4/5 grade on NRB Bearings

| Updated on January 03, 2014

Research House: Crisil Research

Fair value: Rs 46

Current market price: Rs 36 (as on January 2, 2014)

Fundamental Grade: 4/5 (indicating “superior fundamentals” relative to all listed securities)

Valuation Grade: 5/5

Crisil Research has assigned a fundamental grade of 4/5 to NRB Bearings Ltd.

The company’s engineering capabilities make it a preferred supplier of customised bearings to leading domestic and global OEMs.

Being positioned in the niche customised bearings segment, the company faces less competition from global bearings manufacturers such as SKF (Sweden) and Timken (the US), that largely produce off-the-shelf bearings.

The company has a low client concentration risk as no customer comprises more than 10 per cent of revenue. Dependence on the domestic auto market (64 per cent of FY13 revenues) and an elevated inventory cycle are concerns.

CRISIL Research expects revenues to increase at a three-year CAGR of 10.3 per cent to Rs 790 crore in FY16. EPS is expected to increase at a three-year CAGR of 11.9 per cent to Rs 6.5 in FY16. Based on the discounted cash flow method, the fair value of Rs 46 per share implies P/E of 8.8x and 7.1x on FY15E and FY16E EPS, respectively.

Published on January 03, 2014

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