NRB Bearings Ltd

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CRISIL IER Independent Equity Research

NRB Bearings Ltd

Q1FY18 results first cut: Standalone earnings in line with expectations

Industry: Auto Components August 11, 2017

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NRB Bearings Ltd’s Q1FY18 standalone earnings were in line with CRISIL Research’s expectations. Highlights are mentioned below. This will be followed by a detailed quarterly update.

 Revenue increased 2.9% y-o-y, but declined 5.1% q-o-q, to ₹1,792 mn.

 EBITDA margin contracted 87 bps y-o-y, but expanded 102 bps q-o-q, to 15.3%. Raw material cost as a percentage of revenue rose 217 bps y-o-y and 285 bps q-o-q to 45.4%.

 Adjusted PAT declined 3.2% y-o-y and 2.0% q-o-q to ₹127 mn.

CRISIL Research’s current IER coverage on NRB Bearings Ltd

In our last report dated July 14, 2017, we had assigned a fundamental grade of 4/5 (superior fundamentals) and a fair value of ₹135 per share. We are reviewing the results in detail and will release an update after discussions with management. Our current fundamental grade and fair value may be revised in the update report.

KEY FORECAST - CONSOLIDATED

(₹ mn) FY15 FY16 FY17 FY18E FY19E

Operating income 6,685 6,726 7,326 8,022 9,087

EBITDA 1,261 1,133 1,256 1,280 1,500

Adj net income 534 433 536 601 745

Adj EPS (₹) 5.5 4.5 5.5 6.2 7.7

EPS growth (%) 60.8 (18.9) 23.7 12.2 24.0

Dividend yield (%) 1.3 1.3 1.2 1.4 1.8

RoCE (%) 16.9 13.8 15.7 15.8 18.5

RoE (%) 22.3 16.0 17.7 17.5 19.0

PE (x) 20.3 25.1 20.3 18.0 14.6

P/BV (x) 4.2 3.8 3.4 3.0 2.6

EV/EBITDA (x) 11.0 12.1 10.7 10.3 8.7

Source: Company, CRISIL Research estimates

KEY STOCK STATISTICS

NIFTY/SENSEX 9711/31214

NSE/BSE ticker NRBBEARING

Face value (₹ per share) 2

Shares outstanding (mn) 96.9

Market cap (₹ mn)/(US$ mn) 10,850/169 Enterprise value (₹ mn)/(US$ mn) 13,349/208 52-week range (₹)/(H/L) 157/103

Beta 0.5

Free float (%) 45.7%

Avg daily volumes (30-days) 216,538 Avg daily value (30-days) (₹ mn) 27.9

FAIR VALUE MOVEMENT SINCE INITIATION

PERFORMANCE VIS-À-VIS MARKET Returns

1-m 3-m 6-m 12-m

NRB -17% -8% -2% -3%

NIFTY 500 -2% 1% 10% 15%

ANALYTICAL CONTACT

Arun Venkatesh [email protected]

Ankit Kedia [email protected]

Client servicing desk

+91 22 3342 3561 [email protected] Q1FY18 Results Summary (Standalone)

(₹ mn) Q1FY18 Q4FY17 Q1FY17 q-o-q (%) y-o-y (%)

Net sales 1,792 1,887 1,741 (5.1) 2.9

Raw material cost 814 804 754 1.3 8.0

Raw material as % of sales 45.4% 42.6% 43.3% 285 bps 217 bps

Other expenses 414 531 414 (22.0) 0.0

Employees cost 289 283 293 2.3 (1.1)

EBITDA 274 270 282 1.7 (2.6)

EBITDA margin 15.3% 14.3% 16.2% 102 bps -87 bps

Depreciation 72 74 74 (2.2) (3.0)

EBIT 202 196 207 3.2 (2.5)

Interest and finance charges 34 36 32 (5.5) 7.5

Operating PBT 168 160 176 5.2 (4.3)

Other income 16 13 14 19.5 16.1

PBT 184 173 189 6.3 (2.9)

Tax 57 43 58 31.1 (2.1)

PAT 127 130 131 (2.0) (3.2)

Adj PAT 127 130 131 (2.0) (3.2)

Adj PAT margin 7.1% 6.9% 7.5% 22 bps -44 bps

No of equity shares (mn) 96.9 96.9 96.9 - -

Adj EPS (₹) 1.31 1.34 1.35 (2.0) (3.2)

Source: Company, CRISIL Research

0 1,000 2,000 3,000 4,000 5,000 6,000

0 20 40 60 80 100 120 140 160 180

Jan-14 Mar-14 Jun-14 Sep-14 Nov-14 Feb-15 May-15 Jul-15 Oct-15 Jan-16 Mar-16 Jun-16 Sep-16 Dec-16 Feb-17 May-17 Aug-17

('000) (₹)

Total Traded Quantity (RHS) CRISIL Fair Value NRB Bearings

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Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process – Analysis of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a five- point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a five-point scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP).

CRISIL

Fundamental Grade Assessment

CRISIL

Valuation Grade Assessment

5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)

4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)

3/5 Good fundamentals 3/5 Align (+-10% from CMP)

2/5 Moderate fundamentals 2/5 Downside (negative 10-25% from CMP)

1/5 Poor fundamentals 1/5 Strong downside (<-25% from CMP)

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Last updated: April 2016

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