JM Financial recommended hold rating on SKF India with a target price of Rs 1570 in its research report dated October 30, 2017.
JM Financial's research report on SKF India
SKF India’s 2QFY18 results beat expectations, as EBITDA grew 45% YoY due to a favourable sales mix (mfg goods at 63% vs. 56%) and lower overheads due to inventory reduction undertaken over the past few quarters. Net sales growth was largely in line with expectations at 4% YoY, but adjusting for GST-related changes, sales were up 6% YoY on a like-to-like basis. Barring wind energy, management remains confident of healthy growth in all other segments and maintains its guidance of doubling annual capex to INR 800mn-1,000mn by FY21 as capacity utilisation has reached 95%.
Given expensive valuations of 27x FY19E and 25x FY20E EPS, we maintain HOLD with a TP of INR 1,570, based on 25x Sep’19E EPS.
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