Timken India - Latin Manharlal Securities Pvt. Ltd

Timken India Ltd. (Timken) co-promoted by The Timken Company, USA (TIMKEN) and Tata Steel Ltd, was incorporated in 1987 as Tata Timken Limited. This was the first ever J.V of TIMKEN. In the year 1999, TIMKEN acquired Tata Steel's 40% equity holding and consequently the company's name was changed to Timken India Ltd effective from 2nd July 1999.

INVESTMENT POSITIVES

- Indian Bearings industry has more than doubled over the last 5 years à Strong Parent – over 100 years of expertise à Product diversification process continues

- Expansion on track @ Chennai facility – new capacity to come on stream by 1HCY12E

- Reputed Clientele – Supplier to major OEMs à Likely De-listing Candidate – promoter holding more than 80%

- Maiden interim dividend declared in 3QCY11

Note : Timken has decided to change its accounting year to financial year (April to March) from calendar year (January to December). The company said preparation of annual accounts covering 15 months (January 2011 to March 2012) will be followed by statutory audit and annual general meeting before 20 July 2012.

OUTLOOK AND VALUATION

At the CMP of Rs.184.0, the stock is trading at 13.1x its FY13E EPS of Rs.14.10 (for the period April-March 2013). We recommend BUY on the stock with a 12-18 months target price of Rs.247, providing an upside of 34.1% from the current levels.

Earlier, we have recommended Timken India Ltd in our Weekender Report dated 19th August 2010 at the then market price of Rs.200.70. "At the CMP of Rs.200.70, the stock is trading at 13.7x its FY12E EPS (15 months period) of Rs.14.67. We recommend BUY on the stock with a 12-18 months target price of Rs.249, providing an upside of 24.2% from the current levels." The stock has achieved our price target on November 8, 2011 when it touched a high of Rs.255.00 on BSE.

Source : Equity Bulls

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