Timken India Ltd (TIL) reported its Q1FY17 numbers that were lower than our estimates on the topline front. This was primarily due to a decline in export revenues • Revenues came in at | 282.2 crore, up 6.3% YoY but below our expectation of | 312.7 crore. Export revenues declined 1% YoY. Domestic revenues also grew slower-than-expected. The same grew 14% YoY against our expectation of 17% YoY • EBITDA margins for Q1FY17 improved 50 bps YoY to 17.4% vs. 16.9% in Q1FY16 due to an improvement in gross margins. Gross margins for the quarter jumped to 42.3% vs. 40.6% in Q1FY16 • PAT increased 21.5% YoY to | 28.4 crore (our estimate | 29.1 crore for the quarter).

Valuation : Timken has traded at a premium valuation given its leadership position in the segment, strong parentage and healthy balance sheet. Given the anticipated growth opportunity in majority its segments like railways, CVs, off-highway vehicles, repairs & services and exports, we the company will continue to command its premium valuations. Accordingly, we value the company at 31x FY18E EPS of | 19.8 to arrive at a target price of | 614. We retain our BUY recommendation on the company.