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Timken India Ltd>
  • CMP : 4,432.0 Chg : -130.55 (-2.86%)
  • Target : 2,810.0 (21.02%)
  • Target Period : 12-18 Month

31 May 2022

Excellent set of Operational numbers...

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

Timken reported excellent Q4FY22 results.

  • Revenue for the quarter came in at ₹ 667.4 crore, up 40% YoY & 30.9% QoQvs. I-direct estimate of ₹ 553.7 crore)
  • Absolute EBIDTA came in at ₹ 179.8 crore, down 57.6% QoQ (I-direct estimate of ₹ 110.7 crore)
  • Tracking its operating performance, Timken ended the quarter with a PAT of ₹ 121.3 crore (vs. I-direct estimate of ₹ 68.1 crore), up 73.9% QoQ.

What should Investors do?

Timken has a strong balance sheet coupled with decent growth prospects led by strong growth in Railways, Wind and Exports.
We maintained our rating to BUY

Target Price and Valuation: We value Timken at ₹ 2810 i.e. 45x P/E on FY24E EPS

Key Triggers for future price performance
  • Announcement of 400 Vande Bharat train and 90,000 wagons in next 3 years
  • Recovery in Indian economy led by mining and industrial segment
  • Strong CAPEX cycle, Strong traction from Wind and services segment

New Stock Ideas

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 ₹ 220 per share

Key Financial Summary

(| Crore) FY19 FY20 FY21 5 year CAGR (FY16-21) FY22 FY23E FY24E 3 year CAGR (FY21-24E)
Net Sales 1,664.4 1,617.8 1,410.5 6.1 2,203.2 2,609.2 3,013.3 28.8
EBITDA 288.6 363.3 251.8 9.2 510.6 613.2 708.1 41.2
EBITDA margin (%) 17.3 22.5 17.9 - 23.2 23.5 23.5 -
Net Profit 148.6 246.1 143.2 9.3 327.1 412.0 469.8 48.6
EPS (|) 19.8 32.7 19.0 - 43.5 54.8 62.5 -
P/E (x) 117.5 70.9 121.9 - 53.4 42.4 37.2 -
EV/EBITDA (x) 60.5 47.0 69.0 - 34.1 28.4 24.6 -
RoCE (%) 15.7 18.6 13.7 - 25.3 32.3 36.9 -
RoE (%) 11.1 15.6 10.7 - 19.7 24.9 28.4 -
- - - - - - - - -
Source: Company, ICICI Direct Research

 Year   Q4FY22   Q4FY22E   Q4FY21   YoY (%)   Q3FY22   QoQ(%)   Comments 
Income from Operation 667.4 553.7 475.4 40.4 510.0 30.9 Decent Performance on Industrail and Services segment side
Cost of materials consumed 197.3 202.2 144.4 36.6 193.8 1.8  
Purchase of stock-in-trade 164.0 114.0 137.2 19.5 128.9 27.2  
Change in inventories (12.4) 0.0 (9.4)   (47.8)    
Gross Margins 47.7 42.9 42.7 11.7 46.1 3.5  
Employee cost 36.4 36.0 32.9 10.6 34.5 5.5  
Other expenses 102.3 91.4 83.4 22.7 86.5 18.3  
EBITDA 179.8 110.1 86.9 107.0 114.1 57.6  
EBITDA Margin (%) 26.9 19.9 18.3 867 bps 22.4 457 bps Margins sustain led by cost optimasation, operating leverage and higher gross margins
Other Income 4.9 5.0 7.9 -37.7 2.8 75.0  
Depreciation 22.4 22.0 19.5 15.0 21.6 3.7  
Interest 1.3 0.5 0.6 124.1 0.3 333.3  
PBT 161.0 92.6 74.7 115.6 95.0 69.5  
Taxes 39.7 24.5 21.7 82.7 25.2 57.5  
PAT 121.3 68.1 52.9 129.2 69.8 73.8  

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