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FAG Bearings’ (FAG) 3QCY2011 results came in ahead of our expectations even
as the automotive and industrial segments witnessed slow activity during the
quarter. Results came in above expectations on the revenue and earnings fronts.
We revise upwards our earnings estimates to factor in strong operating
performance. We maintain our Accumulate view on the stock.
Better-than-expected quarterly performance: For 3QCY2011, FAG reported a
strong 22.5% yoy (4.5% qoq) increase in revenue to `334cr, above our
expectation of `311cr. Revenue performance exceeded estimates in spite of
sluggish demand in the automotive and industrial markets. EBITDA margin
expanded by 216bp yoy (down 51bp qoq) to 19.8%, largely due to a decline in
other expenses. Other expenditure as a percentage of sales declined by
259bp yoy. However, the dip in other expenditure was offset by the depreciation
of INR against EUR during the quarter, which led to a 138bp yoy increase in
traded goods as a percentage of sales. Net profit grew by a robust 44.4% yoy
(1.5% qoq) to `45cr as a result of higher-than-expected operating performance.
Further, a steep increase in other income (up 67.5% yoy) and lower tax rate
benefitted the company’s bottom-line growth.
Outlook and valuation: We have a positive view on FAG, considering its strong
parentage, debt-free status and cash balance worth `180/share on books.
At `1,327, the stock is trading at 11.6x CY2012E earnings. We maintain our
Accumulate rating on the stock with a target price of `1,396.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
FAG Bearings’ (FAG) 3QCY2011 results came in ahead of our expectations even
as the automotive and industrial segments witnessed slow activity during the
quarter. Results came in above expectations on the revenue and earnings fronts.
We revise upwards our earnings estimates to factor in strong operating
performance. We maintain our Accumulate view on the stock.
Better-than-expected quarterly performance: For 3QCY2011, FAG reported a
strong 22.5% yoy (4.5% qoq) increase in revenue to `334cr, above our
expectation of `311cr. Revenue performance exceeded estimates in spite of
sluggish demand in the automotive and industrial markets. EBITDA margin
expanded by 216bp yoy (down 51bp qoq) to 19.8%, largely due to a decline in
other expenses. Other expenditure as a percentage of sales declined by
259bp yoy. However, the dip in other expenditure was offset by the depreciation
of INR against EUR during the quarter, which led to a 138bp yoy increase in
traded goods as a percentage of sales. Net profit grew by a robust 44.4% yoy
(1.5% qoq) to `45cr as a result of higher-than-expected operating performance.
Further, a steep increase in other income (up 67.5% yoy) and lower tax rate
benefitted the company’s bottom-line growth.
Outlook and valuation: We have a positive view on FAG, considering its strong
parentage, debt-free status and cash balance worth `180/share on books.
At `1,327, the stock is trading at 11.6x CY2012E earnings. We maintain our
Accumulate rating on the stock with a target price of `1,396.
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