Hold on to NRB Bearings; target of Rs122: Icicidirect

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26 Aug, 2025 12:21

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Icicidirect research report on NRB BearingsNRB Bearings’ Q3FY16 sales were below our estimate due to subdues demand across two wheeler and auto segment Standalone topline declined 4.6% YoY to Rs158.8 crore, below our estimate of Rs 177.4 crore, mainly due to a lower-than-expectedrecovery in the auto space. The 2W volume growth remained tepid inQ3FY16 at 1.1% YoY, thus impacting the domestic OEM segment EBITDA declined 33.4% YoY to Rs 20.3 crore below our estimate of 32.5 crore for the quarter primarily due lower than anticipated revenue and increased stores & spare expenses and employee cost in Q3FY15. EBITDA margins declined 552 bps YoY to 12.8% mainly owing to lower sales, higher share of low margin trading business and increased operating expenses in Q3FY16 Consequently, PAT declined 36.9% YoY to Rs 7.8 crore in Q3FY16, below our expectation of Rs15.0 crore for the quarter. Valuation NRB has been a key player in the domestic bearings industry consideringits leadership position in needle roller bearings. Being an automotive centric supplier with customised product offerings, the company also enjoys a sticky client relationship like its MNC peers such as SKF, Fag and Timken and has a presence across all leading OEM players in India. NRB has consistently demonstrated a handsome financial performance with revenues and earnings CAGR of 15.6% and 65.9%, respectively, in FY09-14. Going ahead, with the overall improvement in the economy and other macro factors such as easing of inflation and lowering of interest rates, automotive volumes are expected to bounce back. NRB, being an important player in the automotive bearings space with a leadership position in needle roller bearings, is expected to be a key beneficiary. We also expect export revenues to grow at 13.0% CAGR in FY15-18E as the company continues to expand its footprint in newer geographies.While we continue to believe that NRB would be one of the keybeneficiaries of a recovery in automotive sector (given its leadership position in needle roller bearings space), the recovery would now be more back ended. We had revised our earning estimate downward to factor in tepid Q3FY16 result which reflects slower recovery in demand. We have revised our earning estimates downward by 26.2% and 17.1% for FY16E and FY17E, respectively. We roll over our valuation metric on FY18E and derive a revised target price to Rs 122 (14x FY18E PAT) vs. Rs 135 earlier. Accordingly, we maintain our HOLD rating on the stock. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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