Q2FY18 Result Update Auto Ancillary BUY CMP (Rs) Target Price (Rs) Potential Upside Sensex Nifty 144 173 % 33,219 10,303 Operational efficiency to continue ' Revenue (growth not comparable due to change in accounting standard) and Net profit increased by 16.1% and 25.2% respectively on YoY basis. As derives ~65% of its total revenue from domestic OEMs, recovery in demand in CVs and festive demand for two wheelers and PVs, led to higher revenue in Q2FY18. Also operational efficiency aided in margin expansion. We remain positive on the company and recommend a Buy. Key Stock data BSE Code NSE Code Bloomberg Shares o/s, Cr (FV 2) Market Cap (Rs Cr) 3M Avg Volume 52 week H/L Shareholding Pattern (%) Promoter FII DII 1 Year relative price performance 140 130 120 110 100 90 80 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Mar-17 Research Analyst 54.7 14.7 11.5 Apr-17 May-17 Jun-17 Ajay Pasari, CFA ajay.pasari@religare.com 530367 NRBBEARING Jun-17 54.3 19.3 1 11.0 Jul-17 Aug-17 Ni y NRBBR:IN 9.7 1,392 129,000 157/100 Sep-17 Sep-17 54.2 18.1 11.2 Oct-17 Nov-17 Q2FY18 Result Update: Total income for Q2FY18 increased by 16.1% to Rs. 208.2 cr compared to Rs. 179.3 cr led by recovery in CV sales in the second half of September post GST implementation. The sales from PV and two wheeler segments were strong on account of festive buying and inventory re-stocking. We expect overall automobile demand to remain strong in the coming quarters on both domestic and export fronts. Operational profit jumped 32.5% to Rs. 38.3 cr against Rs. 28.9 cr in the same quarter last fiscal. Operational margin surprised with 227 bps gain YoY and stood at 1% compared to 16.1% in Q2FY17, led by fall in other expenses (down 1.2% YoY). Improving product mix and operational efficiency aided in margin improvement. As a result, Net profit increased by 25.2% to Rs. 2 cr on YoY basis, led by better operational performance, falling interest cost (down 17.5% YoY) and lower depreciation expense (up 2.7% YoY). We expect PAT margin to improve further in FY18-20E, on account of strong product mix, cost rationalization measures and higher sales. Outlook & Valuation: We expect to report healthy performance over the next 2-3 years, given healthy outlook for automobile industry globally. It commands ~70% market share in the needle roller bearing industry. The company caters to all segments of the automobile industry (2W, 3W, PV, CV, etc.) and derives ~65% of its revenue from domestic OEMs. We also expect export sales to remain strong, as global economies have seen gradual recovery in the past few quarters and may improve further in the coming quarters. With the implementation of GST, the company will be in the position to capture additional market share in the aftermarket segment, which is mainly dominated by unorganized players. Thus, we remain positive on the business and recommend a Buy on the stock with a target of Rs. 173. Financial Summary Particulars, Rs cr Total income APAT APATM (%) EPS, Rs RoE (%) P/E (x) FY17 FY18E FY19E 728 119 52 17.5 811 137 65 19.2 21.7 917 157 77 1,036 180 93 2 18.3 November 9, 2017
Q2FY18 Result Update Auto Ancillary P&L Account Quarterly Particulars, Rs cr Q2FY18 Q2FY17 Y-o-Y % Q1FY18 Q-o-Q % Net revenue Expenditure Raw material consumed Employee cost Other expenses 208.2 91.7 32.4 45.8 179.3 77.0 27.0 46.4 16.1-1.2 179.2 8 28.9 4 16.2 11.9 10.8 38.3 28.9 32.5 27.4 3 1 16.1 227bps 15.3 308bps Other income 3.6 6.3-43.2 7 Depreciation 7.6 7.4 2.7 4.7 PBIT 34.3 27.8 23.2 22.2 54.3 Interest expenses 3.6 4.4-17.5 3.9-5.7 PBT 23.4 30.9 1 66.9 Exceptional items Tax 9.5 6.6 4 5.7 67.7 Tax/PBT % 3 311bps 31.0 14bps PAT 2 25.2 66.6 PATM (%) 10.2 9.4 74bps 7.1 307bps EPS 2.2 1.7 25.2 1.3 66.6
P&L Account Particulars, Rs cr FY17 FY18E FY19E Net revenue Expenditure Raw material consumed Employee cost Other expenses Total expenditure Other income Depreciation PBIT Interest expenses PBT Exceptional items Tax Tax rate % PAT Share of minority interest Adjusted PAT PATM (%) EPS 727.6 27 130.2 206.1 608.3 119.3 7.8 31.8 95.3 75.3 21.7 53.5-52.2 811.3 307.3 144.5 222.6 674.4 136.9 8.2 33.9 11 94.6 2 66.2-1.5 64.8 91 351.3 161.9 247.1 760.2 156.5 8.8 37.6 127.8 1 33.8 78.9-2.2 7 1,035.9 398.2 181.3 27 856.2 179.7 9.5 39.2 15 136.3 40.9 9-2.3 93.1 Balance sheet Particulars, Rs cr FY17 FY18E FY19E Share Capital Reserves & Surplus Total Shareholder's Fund Minority Interest Non-Current Liabilities Long term borrowings Deffered tax liability Other long term liabilities Long term provision Current Liabilities Short term borrowings Trade payables Short term provisions Other current liabilities Total liabilities Fixed Assets Deferred Tax Assets Long Term loans & advances 297.7 3 5.5 132.6 107.5 6.2 6.2 287.6 157.3 104.6 24.3 742.8 255.3 43.5 338.2 357.6 11 86.0 1 6.6 6.8 292.7 149.4 116.1 1.6 25.6 768.5 251.7 41.3 386.1 405.5 6.4 101.0 73.1 13.2 7.5 29 141.9 130.1 1.8 25.8 812.5 244.5 40.9 444.3 463.7 6.4 92.8 62.1 14.6 8.1 309.8 134.8 147.0 26.1 872.7 236.2 4 Current Assets 443.5 475.0 526.6 595.6 Current Investments Inventories 172.3 189.5 212.3 235.6 Trade receivables 221.2 247.7 275.0 302.5 Cash & Cash equivalents 22.6 9.8 1 26.8 Short term loans and advances 26.3 28.2 2 Total assets 742.8 768.5 812.5 872.7
Cash Flow statement Particulars, Rs cr Profit Before Tax Add: Depreciation Add: Interest cost Op profit before working capital changes Changes In working Capital Direct taxes Cash Flow From Operating Cash Flow from Investing Purchase of Fixed assets Cash Flow from Investing Key Financial ratios FY17 FY18E FY19E Particulars, Rs cr FY17 FY18E FY19E 75.3 31.8-5.0 122.1-83.8-21.7 16.6 94.6 33.9 145.1-28.6-2 88.1 1 37.6 165.3-36.0-33.8 95.6 136.3 39.2 189.3-33.8-40.9 114.5 Dividend per share Rs Dividend Yield (%) Payout % EPS Rs Book Value per share Rs Profitability Ratios / Total income (%) PBT/Total income (%) NPM / Total income (%) 26.0 32.7 10.3 2.1 36.9 11.7 2.4 1.7 30.8 41.8 12.3 ROCE (%) 17.4 18.9 2 ROE (%) 17.5 19.2-19.3-4.0-23.3-3 -0.9-30.9-3 -1.0-31.0-3 - -3 Liquidity ratios Debt-Equity Ratio Current Ratio 0.8 1.5 0.7 1.6 1.8 Interest Cover Ratio 4.7 8.5 3.0 47.8 13.2 23.4 2 0.4 1.9 10.9 Cash from Financing Turnover ratios Net proceeds from borrowing 27.5-29.4-20.4-18.1 Total Asset Ratio 1.0 1.2 1.2 Dividend (incl dividend tax) -24.2-28.9-34.9 Fixed Assets Ratio 2.9 3.3 3.8 4.5 Interest cost - - - - Debtors Velocity Overall (Days) 112.2 105.5 104.1 101.7 - Inventory (Days) 79.5 8 8 78.9 Cash Flow from Financing -0.9-70.1-64.3-66.8 Creditors Velocity (Days) 48.8 49.7 4 48.8 Cash Conversion cycle 142.9 13 135.0 131.8 Net Cash Inflow / Outflow -7.6-12.9 0.3 1 Opening Cash & Cash Equivalents 31.3 22.6 9.8 1 GROWTH YOY% Closing Cash & Cash Equivalent 23.7 9.8 1 26.8 Sales Growth % Operating Profit % 7.8 11.5 14.7 13.0 14.3 13.0 14.8 Net Profit Growth % 23.9 23.8 20.9 VALUATION P / E Ratio P / BV Ratio EV / 4.4 21.7 18.3 3.9 3.5 3.0 11.9 10.2 8.7
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