SKF India
Will keep on rolling faster
Sustained expansions and buoyant economy will ensure smooth growth for this MNC associate
| Buy | SKF India |
| BSE Code | 500472 |
| NSE Code | SKFINDIA |
| Bloomberg | SKF@IN |
| Reuter | |
| 52-week High/Low | Rs 513 / Rs 264 |
| Current Price | Rs 410 (as on 26th October 2007) |
SKF India (subsidiary 53.58% of SKF, Sweden) is the market leader in the bearing industry and is the main bearing supplier to all consumer segments viz. the automotive, electrical, industrial and aftermarket. In addition to its comprehensive range of bearings being manufactured at its Pune and Bangalore plants or imported to India from any of the Group's overseas plants, SKF is also offering a wide range of bearing related products and systems such as Condition Monitoring Systems for Trouble-free Operations, Linear Motion Products, Machine Tool Spindle maintenance, Reliability Systems, etc.
Excellent September 2007 quarter results
For the quarter ended September 2007, sales revenue stood at Rs 386.98 crore, up 14%. OPM (Operating Profit Margin) increased sharply by 620 basis points to 17.6%, taking OP up by 76% to Rs 68.26 crore.
Other income increased 5% to Rs 1.81 crore and the company earned interest income of Rs 3.38 crore, up 238%. depreciation charges increased 3% to Rs 7.58 crore. Consequently, PBT stood at Rs 65.87 crore, higher by 94%.
Provision for tax (including deferred tax and fringe benefit tax) grew 95% to Rs 22.77 crore, taking up PAT by a whopping 92% to Rs 43.10 crore.
For the nine months ended Sept'07, sales stood at Rs 1148.25 crore, up 19%. OPM by 500 basis points to 16.9% and took OP up by 68% to Rs 193.62 crore.
PBT before EO stood at Rs 185.64 crore, up 80%. For the nine months ended September 2006 there was EO gain of Rs 2.69 crore against nil in the current quarter. Thus PBT after EO stood at Rs 185.64 crore which was 76% higher.
Provision for tax (including deferred tax and fringe benefit tax) stood Rs 65.13 crore resulting in PAT of Rs 120.51 crore, up 72%.
Commenting on the results, Rakesh Makhija, Managing Director, SKF India, said, 'Our business continues to grow sharply, driven by a strong focus on our major customers and segments. Exports continue to ramp up significantly, while we drive our costs down in all areas of our operations.'
Diverse product range
SKF India locally manufactures a product range comprising about 60 sizes of Deep Groove Ball Bearings, 70 sizes of Taper Roller Bearings, Textile machinery Components, Automotive Specials, bearing accessories like housings, sleeves etc to cater to the needs of the Automotive, Electrical and Industrial OEMs and aftermarket customers. Through its wide product range it satisfies the needs of its local market, providing a bearing for any and every conceivable application.
Along with a varied product range of rolling bearing and seals, it also offers extensive solutions and services in this area.
SKF also has an increasingly important position in the market for linear motion products, high precision bearings, spindles and spindle services for the machine tool industry, electrical actuators, actuation systems and is an established producer of rolling bearing steel. Over the next five years, the management plans that the share of bearings in the total volumes may come down from 90% of the total volumes to 75-80%. SKF is also looking at the aerospace business for supplying precision bearings.
Growing its already commanding market share
SKF India's current market share is around 30%, this is higher by 2% as compared to FY 2006. Approximately 60% of the total sales of bearings are to OEMs, while the remaining 40% are market/replacement sales.
It is also gradually moving towards becoming a total solution provider by not only providing bearings, but also related other accessories as also quality service.
Demand keeps rolling from the user industries
Demand for bearings has a close correlation to the growth in the manufacturing sector. The Indian economy is growing at more than 9% with the growth in manufacturing segment being around more than 10%. This growth has spurred capital investments in many sectors for creating fresh capacity to meet the growing demand. All forecasts for the coming years show that the buoyancy in overall growth trend is expected to continue. The management aims to leverage the upturn in the economy, its market leadership and financial strength for continuous strong growth.
Automobile industry, which is also a major user industry for bearings, suffered some slowdown in recent times due to rise in interest rates. However, with interest rates gradually easing, the industry is likely to regain healthy growth rates. Due to its strong presence in industrial bearings, SKF has been able to grow significantly in spite of slowdown in the auto industry.
Aims to double turnover by 2010
SKF India aims to double its turnover over the next 3-4 years. The company has backed up significant investments to expand manufacturing capacities in India on the back of buoyancy in demand for products in the automotive and industrial businesses.
The company will invest about Rs 100 crore in every 18-month cycle to expand its existing capacities and setting up new units. The company expects an investment of Rs 200-500 crore to achieve its goal of doubling its present turnover by 2010.
Reasonable valuation
For FY2007 (ending December 2007), we expect the company to register net sales and net profit of Rs 1584.40 crore and Rs 167.50 crore. This gives an EPS of Rs 31.8. At current market price of Rs 410, the EPS is discounted only 12.9 times. This EPS is likely to rise to around Rs 40 in FY 2008. Thus at the current price, P/E falls to just 10.
|
| 0412(12) | 0512 (12) | 0612 (12) | 0712 (12P) | 0812 (12P) |
| Sales | 581.31 | 781.39 | 1342.49 | 1584.40 | 1869.59 |
| OPM (%) | 15.5 | 12.0 | 12.4 | 16.9 | 17.5 |
| OP | 89.82 | 93.70 | 166.45 | 267.77 | 327.18 |
| Other inc. | 23.01 | 34.62 | 8.34 | 8.19 | 10.00 |
| PBIDT | 112.83 | 128.32 | 174.79 | 275.96 | 337.18 |
| Interest (Net) | 0.54 | -4.74 | -4.48 | -12.27 | -18.00 |
| PBDT | 112.29 | 133.06 | 179.27 | 288.23 | 355.18 |
| Dep. | 25.96 | 25.93 | 28.82 | 30.54 | 33.59 |
| PBT before EO | 86.33 | 107.13 | 150.45 | 257.69 | 321.58 |
| EO | 0.00 | 0.00 | 2.69 | 0.00 | 0.00 |
| PBT after EO | 86.33 | 107.13 | 153.14 | 257.69 | 321.58 |
| Tax Expense | 31.72 | 38.98 | 51.18 | 90.19 | 110.63 |
| PAT Before PPA | 54.61 | 68.15 | 101.96 | 167.50 | 210.96 |
| EPS (Rs)* | 10.5 | 12.9 | 19.0 | 31.8 | 40.0 |
| * Annualised on current equity of Rs 52.73 crore. Face Value: Rs10 each | |||||
| SKF India: Results |
|
| 0709 (3) | 0609 (3) | Var. (%) | 0709 (9) | 0609 (9) | Var. (%) | 0612 (12) | 0512 (12) | Var. (%) |
| Sales | 386.98 | 339.38 | 14 | 1148.25 | 963.23 | 19 | 1342.49 | 781.39 | 72 |
| OPM (%) | 17.6 | 11.4 |
| 16.9 | 11.9 |
| 12.4 | 12 |
|
| OP | 68.26 | 38.70 | 76 | 193.62 | 115.10 | 68 | 166.45 | 93.70 | 78 |
| Other inc. | 1.81 | 1.72 | 5 | 5.79 | 5.93 | -2 | 8.34 | 34.62 | -76 |
| PBIDT | 70.07 | 40.42 | 73 | 199.41 | 121.03 | 65 | 174.79 | 128.32 | 36 |
| Interest (Net) | -3.38 | -1.00 | 238 | -8.77 | -2.98 | 194 | -4.48 | -4.74 | -5 |
| PBDT | 73.45 | 41.42 | 77 | 208.18 | 124.01 | 68 | 179.27 | 133.06 | 35 |
| Dep. | 7.58 | 7.38 | 3 | 22.54 | 21.10 | 7 | 28.82 | 25.93 | 11 |
| PBT before EO | 65.87 | 34.04 | 94 | 185.64 | 102.91 | 80 | 150.45 | 107.13 | 40 |
| EO | 0.00 | 0.00 | 0 | 0.00 | 2.69 | PL | 2.69 | 0.00 | LP |
| PBT after EO | 65.87 | 34.04 | 94 | 185.64 | 105.60 | 76 | 153.14 | 107.13 | 43 |
| Tax Expense | 22.77 | 11.65 | 95 | 65.13 | 35.38 | 84 | 51.18 | 38.98 | 31 |
| PAT Before PPA | 43.10 | 22.39 | 92 | 120.51 | 70.22 | 72 | 101.96 | 68.15 | 50 |
| PPA | 0.00 | 0.00 | 0 | 0.00 | 0.00 | 0 | 0.00 | -4.08 | LP |
| PAT After PPA | 43.10 | 22.39 | 92 | 120.51 | 70.22 | 72 | 101.96 | 64.07 | 59 |
| EPS (Rs)* | 32.7 | 17.0 |
| 30.5 | 17.3 |
| 19.0 | 12.9 |
|
| * Annualised on current equity of Rs 52.73 crore. Face Value: Rs10 each | |||||||||
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