Buy Timken India; target of Rs 830: ICICI Direct

ICICI Direct's research report on Timken India

Timken India (TIL) reported a stellar Q4FY19 performance on the back of over 2x growth in railways segment. Exports segment also grew at strong double digits for the quarter. Accordingly, revenues came in at Rs 448 crore, up 16.4% QoQ. Gross margins came in at 46.1% vs. 45.6% QoQ due to better product mix. EBITDA margins came in at 22.6% vs. 14.4% QoQ due to lower ‘other expenses’ (reassignment of products at ABC’s Baruch facility). TIL also received some pass through in input prices in the quarter. Thus, absolute EBITDA grew 82.2% QoQ to Rs 101.2 crore. Other income also jumped 2x QoQ. Thus, PAT increased 116.5% QoQ to Rs 57.2 crore. We expect revenue, EBITDA, PAT to grow at 12.1%, 14.5%, 18.5%, respectively, in FY19-21E.

Outlook

We expect strong EBITDA growth as we estimated higher utilisation in FY20-21E. We value the company at 30x FY21E EPS to arrive at a target price of Rs 830. We maintain BUY recommendation on the stock.