1
Nov 09, 2017
NRB Bearings Ltd
Recommendation (Rs.)
CMP (as on Nov 08, 2017) 144
Target Price 160
Previous Target Price 146
Upside (%) 11
Stock Information
Mkt Cap (Rs.mn/US$ mn) 13942 / 215
52-wk High/Low (Rs.) 157 / 100
3M Avg. daily volume 149449
Beta (x) 0.6
Sensex/Nifty 33219 / 10303
O/S Shares(mn) 96.9
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 54.2
FIIs 18.1
DIIs 16.5
Others 11.2
Stock Performance (%)
1M 3M 6M 12M
Absolute 20 25 24 17
Relative to Sensex 15 21 12 (3)
Source: Bloomberg
Relative Performance*
Source: Bloomberg; *Index 100
For private circulation only. For important information about Karvy’s rating system and other disclosures refer
to the end of this material. Karvy Stock Broking Research is also available on Bloomberg, KRVY<GO>,
Thomson Publishers & Reuters
Exhibit 1: Valuation Summary
YE Mar (Rs. Mn) FY15 FY16 FY17 FY18E FY19E
Net Sales 7216 7388 7969 8542 9226
EBITDA 1231 1105 1193 1294 1379
EBITDA Margin (%) 17.1 15.0 15.0 15.2 15.0
Adj. Net Prot 537 432 554 582 701
EPS (Rs.) 5.5 4.3 5.6 5.9 7.1
RoE (%) 22.7 16.2 18.6 17.2 18.0
PE (x) 24.0 28.4 19.5 24.4 20.2
Source: Company, Karvy Research, *Represents multiples for FY15, FY16 & FY17 are based on historic market price
Company Update
India Research - Stock Broking
HOLD
Analyst Contact
Arvind Vinjamoori
040 - 3321 6270
arvind.vinjamoori@karvy.com
Industrials - Manufactured Goods
NRB Bearings Ltd
Bloomberg Code: NRBBR IN
Earnings Revision (%)
YE Mar FY18E FY19E
Sales (%) 0.0 0.0
EBITDA (%) 0.0 7.2
PAT (%) 0.0 14.8
Source: Karvy Research
L
L
Exports, along with Domestic Revival, set to Aid Revenue
Moderate growth with healthy margin expansion: Standalone sales grew at
a moderate 5.7% sequentially and 5.6% YoY to reach Rs. 2082 Mn. EBITDA has
recorded an impressive 39.6% QoQ & 32.5% YoY growth due to easing material
and other expenses. On QoQ basis, material expenses have eased by 31 bps
while other expenses eased by 101 bps. Reduced interest cost aided in better EBIT
growth. EBITDA, EBIT and PAT margins have registered 446 bps, 450 bps & 372
bps on QoQ to reach 18.4%, 14.8% & 10.2% respectively. Stable tax rate of 31.1%
aided in PAT margin expansion. YTD basis, NRB revenue has recorded a 4.3%
growth, while EBITDA & PAT have grown by 15.2% & 12.8% respectively. EBITDA,
EBIT & PAT margins have also expanded by 153 bps, 169 bps & 63 bps to reach
16.2%, 12.6% & 8.3% respectively for H1FY18.
Auto recovery and growing exports to drive revenue: In view of the reviving
domestic auto industry, increased budgetary allocations to auto & ancillary sectors
and an anticipated improvement of ~15% CAGR growth in exports is expected to
boost the revenue further. Going forward, we believe NRBBR to realize maximum
benets of its reputed clientele due to its sticky relationships. Considering NRBBR’s
market leadership in needle roller bearing segment with ~70% market share and
customized nature of its product mix requiring NRBBR to work closely with the
clientele from the conceptualization stage enables the company to maintain a close
& long term relationship with its clients. NRBBR’s focus on expanding in international
markets & catering to global players is expected to aid in export revenue.
Prudent working capital management to strengthen the balance sheet:
Management is more focused on eciently managing the working capital which is
expected to yield good results in times ahead. Also the usage of surplus cash in
repayment of debt is expected to aid in reducing the debt from the current higher
levels, consequently reducing the nance costs to Rs. 149 Mn & Rs. 136 Mn in
FY18E & FY19E respectively thus improving the protability.
Valuation and Outlook
In view of the changing market dynamics, macro policies & NRBBR’s focus to
increase its exports revenue, we maintain our positive view on the company. While
revisiting FY19E nancials, we value NRBBR at 22.5x to FY19E EPS of Rs.7.1 with
an upwardly revised target price of Rs. 160 and recommend a “HOLD” rating for
next 9-12 months.
L
L
L
L
L
L
L
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80
90
100
110
120
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug -17
Sep-17
Oct
-17
Nov-17
NRBBR
Sensex
2
Nov 09, 2017
NRB Bearings Ltd
Exhibit 2: Q2FY18
YE Mar (Rs. Mn) Q2FY18 Q1FY18 QoQ % Q2FY17 YoY % YTDFY18 YTDFY17 YoY %
Turnover 2082 1970 5.7 1972 5.6 4052 3885 4.3
Expenditure 1699 1695 0.2 1683 1.0 3395 3314 2.4
EBITDA 383 274 39.6 289 32.5 657 571 15.2
Depreciation 76 72 4.7 74 2.7 148 148 (0.1)
Interest 36 39 (5.7) 44 (17.5) 75 81 (7.5)
Other Income 36 20 78.1 63 (43.2) 56 82 (31.6)
PBT 307 184 67.0 234 30.9 491 424 15.8
Ta x 95 57 67.7 66 44.5 152 124 23.1
Adjusted PAT 211 127 66.7 168 25.5 338 300 12.8
EBITDA Margin (%) 18.4 13.9 446 bps 14.6 374 bps 16.2 14.7 153 bps
EBIT Margin (%) 14.8 10.3 450 bps 10.9 384 bps 12.6 10.9 169 bps
Net Prot Margin (%) 10.2 6.4 372 bps 8.5 161 bps 8.3 7.7 63 bps
Source: Company, Karvy Research
Exhibit 3: Margin Analysis
YE Mar Q2FY18 Q1FY18 QoQ % Q2FY17 YoY % YTDFY18 YTDFY17 YoY %
Material Expenses as % of Net Sales 38.1 37.8 31 bps 39.4 (131) bps 38.0 38.3 (28) bps
Employee Expenses as % of Net Sales 15.6 14.7 86 bps 13.7 189 bps 15.1 14.5 67 bps
Other Expenses as % of Net Sales 22.0 21.0 101 bps 23.5 (152) bps 21.5 22.6 (107) bps
EBITDA Margin (%) 18.4 13.9 446 bps 14.6 374 bps 16.2 14.7 153 bps
Tax Rate (%) 31.1 31.0 12 bps 28.2 294 bps 31.0 29.2 185 bps
Net Prot Margin (%) 10.2 6.4 372 bps 8.5 161 bps 8.3 7.7 63 bps
Source: Company, Karvy Research
Exhibit 4: QoQ Revenue Trend
Source: Company, Karvy Research
Exhibit 5: Revenue Segmentation
Source: Company, Karvy Research
Needle roller
bushes &
cages
40.9%
Ball & roller
bearings
37.5%
Others
4.1%
-40%
-10%
20%
50%
80%
0
500
1000
1500
2000
Q1 FY15
Q2 FY15
Q3 FY15
Q4 FY15
Q1 FY16
Q2 FY16
Q3 FY16
Q4 FY16
Q1 FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Revenue (Rs Mn)
QoQ Growth (%)
YoY Growth (%)
3
Nov 09, 2017
NRB Bearings Ltd
Key Risks
Slowdown in automotive segment & industrial activity may aect revenue.
Volatility in raw material prices may pose a threat to margins.
Exhibit 8: Financials
YE Mar (Rs. Mn)
FY18E FY19E
Old New % Change Old New % Change
Net Sales 8542 8542 0.0 9226 9226 0.0
EBITDA 1294 1294 0.0 1287 1379 7.2
EBITDA Margin (%) 15.2 15.2 0 bps 14.0 15.0 100 bps
Adj. Net Prot 582 582 0.0 610 701 14.8
EPS (Rs.) 5.9 5.9 0.0 6.2 7.1 14.8
Source: Company, Karvy Research
Key takeaways
The company is in the ball and roller bearing business for the requirements of the mobility industry which has Original
Equipment Manufacturers (OEMs) accounting for 65%-70% of the demand while the rest is supplied to the After-market
(12%-15%) and Exports (20%-25%).
While NRBBR enjoys a market share of ~13.0% in the overall domestic organized bearings segment, nearly 40.9% of its
revenue comes from needle roller bearings alone where NRBBR enjoys ~70% market share. While ball & roller bearings
contribute around 37.5%, automotive components contribute around 17.5% to total revenue.
The Automotive Mission Plan (AMP II) for the period 2016-26E aims to propel the Indian Automotive industry to be the engine
of the “Make In India” program as it is amongst the foremost drivers of the manufacturing sector and is likely to contribute 40%
of the manufacturing sector, adding in excess of 12% of India’s GDP over the next decade. India is expected to be among the
top 5 nations in the world in engineering, manufacturing and exports of vehicles and auto components.
Exports are likely to increase 5x (vehicles) and 7.5x (components) with dedicated facilities for last mile connectivity to ports
being set up in several ports on both western and eastern coasts.
Boost for farm equipment requirements is imminent with expectations of a more than normal monsoon, technology aiding
improvement in productivity systems, micro-irrigation intensifying and nancing for the same being readily available and at
lower aordable rates.
Most of the world’s large vehicle manufacturers have set up base in India and are expanding capacities with a thrust on
localization to improve competitiveness which may add further value to NRBBR.
Exhibit 6: QoQ EBITDA Trend
Source: Company, Karvy Research
Exhibit 7: QoQ PAT & PAT Margin
Source: Company, Karvy Research
0%
5%
10%
15%
20%
25%
0
120
240
360
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
EBITDA (Rs. Mn)
EBITDA Margin (%)
0%
5%
10%
15%
20%
25%
0
120
240
360
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
PAT (Rs. Mn)
PAT Margin (%)
4
Nov 09, 2017
NRB Bearings Ltd
Financials
Exhibit 9: Income Statement
YE Mar (Rs. Mn) FY15 FY16 FY17 FY18E FY19E
Revenue 7216 7388 7969 8542 9226
Growth (%) 9.0 2.4 7.9 7.2 8.0
Operating Expenses 5985 6283 6775 7248 7846
EBITDA 1231 1105 1193 1294 1379
Growth (%) 19.3 (10.2) 8.0 8.5 6.6
Depreciation & Amortization 310 319 323 371 353
Other Income 33 24 78 34 83
EBIT 920 785 870 923 1027
Interest Expenses 172 170 169 149 136
PBT 780 639 779 808 973
Tax 243 207 225 226 273
Adjusted PAT 537 432 554 582 701
Growth (%) 59.4 (19.6) 28.3 5.1 20.5
Source: Company, Karvy Research
Exhibit 10: Balance Sheet
YE Mar (Rs. Mn) FY15 FY16 FY17 FY18E FY19E
Cash & Equivalents 280 320 226 231 427
Sundry Debtors 1998 2259 2212 2434 2629
Inventory 1642 1447 1723 1721 1889
Loans & Advances 806 649 698 729 765
Investments 1 1 1 1 1
Gross Block 5735 5900 6040 6240 6440
Net Block 2578 2590 2465 2344 2241
CWIP 35 48 88 88 88
Miscellaneous 6 5 16 16 16
Total Assets 7345 7320 7428 7563 8056
Current Liabilities & Provisions 1719 1926 1366 1404 1532
Debt 2860 2372 2647 2297 2097
Other Liabilities 196 189 189 189 189
Total Liabilities 4775 4487 4203 3891 3819
Shareholders Equity 194 194 194 194 194
Reserves & Surplus 2348 2598 2977 3413 3966
Total Networth 2542 2792 3171 3607 4160
Minority Interest 29 41 55 65 77
Total Networth & Liabilities 7345 7320 7428 7563 8056
Source: Company, Karvy Research
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Nov 09, 2017
NRB Bearings Ltd
Exhibit 11: Cash Flow Statement
YE Mar (Rs. Mn) FY15 FY16 FY17P FY18E FY19E
PBT 780 639 779 808 973
Depreciation 310 319 323 371 353
Interest 172 170 169 149 136
Tax Paid (283) (210) (264) (226) (273)
Inc/dec in Net WC (313) 34 (165) (212) (272)
Other Income 33 24 78 34 83
Other non cash items 7 (57) (66) (34) (83)
Cash ow from operating activities 706 919 854 890 918
Inc/dec in capital expenditure (179) (189) (274) (250) (250)
Others (59) 94 13 - -
Cash ow from investing activities (238) (96) (261) (250) (250)
Inc/dec in borrowings 76 (274) (374) (350) (200)
Dividend paid (107) (281) (139) (136) (136)
Interest paid (172) (170) (169) (149) (136)
Others (42) (62) (9) - -
Cash ow from nancing activities (245) (787) (690) (635) (472)
Net change in cash 222 36 (97) 5 196
Source: Company, Karvy Research
Exhibit 12: Key Ratios
YE Mar FY15 FY16 FY17 FY18E FY19E
EBITDA Margin (%) 17.1 15.0 15.0 15.2 15.0
EBIT Margin (%) 12.8 10.6 10.9 10.8 11.1
Net Prot Margin (%) 7.4 5.8 6.9 6.8 7.6
Dividend Payout Ratio (%) 32.7 33.0 33.0 33.0 33.0
Net Debt/Equity (x) 1.0 0.7 0.8 0.6 0.4
RoE (%) 22.7 16.2 18.6 17.2 18.0
RoCE (%) 16.0 16.3 16.2 16.2 16.2
Source: Company, Karvy Research
Exhibit 13: Valuation Parameters
YE Mar FY15 FY16 FY17 FY18E FY19E
EPS (Rs.) 5.5 4.3 5.6 5.9 7.1
DPS (Rs.) 1.3 3.5 1.4 1.4 1.4
BVPS (Rs.) 26.2 28.8 32.7 37.2 42.9
PE (x) 24.0 28.4 19.5 24.4 20.2
P/BV (x) 5.0 4.3 3.3 3.9 3.4
EV/EBITDA (x) 12.5 12.7 10.9 12.4 11.4
EV/Sales (x) 2.1 1.9 1.6 1.9 1.7
Source: Company, Karvy Research, *Represents multiples for FY15, FY16 & FY17 are based on historic market price
6
Nov 09, 2017
NRB Bearings Ltd
Stock Ratings
Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : <5%
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