Timken India Ltd.

NSE: TIMKEN | BSE: 522113 | ISIN: INE325A01013 |Industry: Industrial Machinery
|Expensive Performer

Timken India Ltd.    
15 Sep 2016
Timken India Ltd Co Update

Growth to Unfold on Account of Improving Demand Environment: Stable revenue growth along with healthy margins - Timken has registered turnover growth of 8.8% sequentially & 8.6% YoY growth for Q1FY17 owing to improved volumes. EBITDA margin has contracted by 150 bps QoQ mainly on account of 15.5% rise in raw material costs & 9.5% rise in employee expenses. EBIT margin & Net profit margin have also contracted by 120 bps & 130 bps sequentially to 14.0% & 9.4% in Q1FY17.

Valuation and Outlook : While introducing FY18E, we have also re-visited the financials for FY17E. While global growth outlook remains gloomy, India is one of the few economies expected to deliver growth. Being a market leader in tapered roller bearings, which largely cater to Medium and Heavy Commercial Vehicle (M&HCV), off-highway equipments and railways markets, Timken is well positioned to benefit from the much anticipated economic revival. At CMP of Rs. 547, Timken is trading at 32.5x to its FY18E EPS. Timken, in view of auto industry revival, positive industry sentiments coupled with healthy zero debt balance sheet, is well positioned to grow in times ahead. We ascribe a multiple of 38.5x FY18E EPS, which is trailing twelve months PE and recommend a “BUY” rating for an upwardly revised target price of Rs. 648 representing an upside potential of 19%.

Timken India Ltd. has an average target of 820.00 from 2 brokers.
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