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Investment Argument
Company is 80% subsidiary of Timken Inc. and is one of the niche playersin Bearing segment with strong technological support from global parent. It manufactures a range of ‐ Tapered Roller Bearings for MCVs/HCVs/ Tractors/Railways & Infrastructure equipments.
It sells to OEMs as well as in replacement markets plus meets global requirements of Timken group. Similarly for the local requirements, it sources from Timken’s global Mfg bases also.
Company is working to make products for Heavy trucks, Infrastructure equipments and Railways/ Metro Rail applications also.
With the strong revival of demand and tremendous potential in all these segments; the performance of company is likely to improve significantly.
Capacity utilizations, so far were very low [appx 30% till Dec.’09], maygo up in current and coming years, leading to high volumes and better margins.
It’s a Zero Debt company with large cash in its books and no capex plans in near term. So with improving outlook, positive cash flow will grow only.
The possibility of open offer for buy back can’t be ruledout either.
Recommendation
With improving demand outlook from user industry, the performance in current and coming years will improvesignificantly. For Dec.’11 we expect company to report EPS of Rs 15‐16, leading to expected price target of Rs 300/‐in 12 months time frame. BUY
