Customising bearing needs… NRB Bearings :: ICICI Securities, report

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->
Customising bearing needs…
We recently met the management of NRB Bearings to understand the
business. NRB Bearing is the fourth largest organised Indian bearing
manufacturer (12% market share) catering to the mobility segment
(automobiles, off-highway vehicles such as construction equipment,
tractors, etc.). It specialises in needle roller bearing, which forms ~50% of
the topline, commanding a staggering 70% market share in the segment.
The company also enjoys superior margins vis-à-vis its peers as it
produces all its output indigenously unlike its peers whose trading item
forms 25-40% of sales.
Presence across all OEMs in India
NRB is the fourth largest bearing manufacturer (organised) in India with a
share of ~12% (in terms of sales) in the organised bearings market. With
a proven track record over 49 years, it is a preferred supplier to leading
domestic OEMs such Hero MotoCorp, Bajaj Auto, Maruti Suzuki, Tata
Motors, Ashok Leyland, etc. Needle roller bearings are customised items.
Therefore, the company works with OEMs from the conceptualisation
stage to provide anti friction solutions. Furthermore, given the integrated
operation, it produces all its output indigenously unlike its peers such as
SKF, FAG and Timken that generate sales through trading from their
parent (trading item forms 25-40% of sales for the peers). These factors
lead to superior EBITDA margins of ~17-18% vs. 11-12% for its peers.
Leading producer of needle roller bearing in India
The company specialises in needle roller bearing, which forms ~50% of
the topline. It commands a staggering 70% market share in the needle
roller bearing segment. With each player concentrating more on their
expertise (SKF on ball bearing & tapered roller bearing, FAG on cylindrical
and spherical bearing and Timken on industrial segment), it faces direct
competition only from INA bearing, which is part of the Schaeffler Group.
Capturing global opportunity through rising exports
To mitigate the domestic market volatility and capture global opportunity,
the company also caters to global players such as Daimler Trucks,
Renault Volvo and Getrag (largest global supplier of transmission systems
to PV/CV). The company’s export, which formed ~ 8% of topline in FY10,
now constitutes ~25% of sales in FY14, enabling NRB to combat the
domestic slowdown.
Available at 11.6x FY14 EV/EBITDA
The stock is currently trading at 26.8x FY14 earnings and 11.6x FY14
EV/EBITDA.

LINK
http://content.icicidirect.com/mailimages/IDirect_NRBBearings_MgmtNote.pdf