NRB Bearings - Company Update - ICICI Direct

NRB registered a rebound in its Q2 performance led by improved production levels at domestic OEMs on account of festive stocking. The performance was further aided by higher exports and strong traction in tractors. Revenue for Q2 came in at Rs. 197.7 crore, down 4.6% YoY (vs. I-direct estimate of Rs. 195.8 crore). Gross margins expanded sharply by ~610 bps. Consequently, EBIDTA margins improved ~530 bps to 15.4%. NRB registered absolute EBIDTA of Rs. 30.4 crore, up 60% YoY. Even though tax rate for the quarter was at 34.7%, ensuing PAT came in at Rs. 11 crore after adjusting for minority interest. During H1FY21, NRB generated CFO to the tune of ~Rs. 63 crore. Further, debt reduced by ~ Rs. 58 crore during H1.

Valuation & Outlook

NRB's performance is largely correlated with the domestic auto segment as ~70% of the topline comes from domestic OEMs. Hence, demand sustenance in the auto segment in the near term should be a key monitorable. The company has reduced its debt by Rs. 58 crore in H1 led by strong CFO generation to the tune of Rs. 63 crore. Going ahead, we expect positive operating leverage to improve margins from 11% in FY20 to 16% by FY22E. We build in revenue, EBIDTA & PAT CAGR of 8.2%, 24.1% & 39.3%, respectively, in FY20-23E. We estimate an EPS of Rs. 7.4/share for FY23E, implying earnings yield of 8% at the CMP. Reflecting the improved outlook for NRB, we upgrade the stock from HOLD to BUY ascribing a 15x multiple to FY22E EPS to arrive at a target price of Rs. 110/share.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_NRBBearings_CoUpdate_Dec20.pdf

Shares of NRB BEARINGS LTD. was last trading in BSE at Rs.92.9 as compared to the previous close of Rs. 91.9. The total number of shares traded during the day was 88957 in over 1677 trades.

The stock hit an intraday high of Rs. 94.9 and intraday low of 91.8. The net turnover during the day was Rs. 8279412.

Source : Equity Bulls

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