March 02, 2017 / 13:36 IST
FAG Bearings’ (FAG) Q4CY16 revenue growth of 4.9% YoY was 1.5% below estimate, mainly hit by lower auto aftermarket sales, which reeled under demonetisation effect. However, PV OEMs, CVs and railway segments logged decent growth. Even as EBIDTA dipped 16.6% YoY (in line with estimates) primarily owing to product mix, currency impact and higher employee expenses, PAT came 15.5% above estimates led by higher other income.
Outlook
We believe FAG is well poised to gain from the huge capex of INR 1bn incurred in CY16, as recovery in automotives is underway and industrials is set for an uptick. The company also stands to gain from structural benefits of localisation and innovation (145 new products introduced in CY15), leading to sustained margin improvement. Maintain ‘BUY’ with a target price of INR 4,700, based on 28x CY18E EPS.
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