SKF India Ltd.(buy)--indian stock market

                  SKF India Ltd. - Q4CY07 Update, CMP Rs.365, Maintained Buy, with a Target Price Rs.540


        For SKF India, 2007 has been a historical year. It marked 100 years of its existence in India and more importantly, it posted one its best

        financial        performances ever for year ended 31st December 2007.


  • For the 12 months ended 31st December 2007, the company posted net sales of Rs.1,568.30 crore, a 17% increase on a YoY basis. EBIDTA surged by a very healthy 52% at Rs.265.24 crore. PBT rose higher by 64% at Rs.247.36 crore. PAT was up by a smart 58% at Rs.160.71 crore, its highest PAT ever!


·         On an equity capital of Rs.52.73 crore, the EPS of the company stands at Rs.30.50, up from Rs.19.30 posted in 2006.


·         Shareholding pattern of the company is 54% with the promoters, 27% with the mutual funds, insurance companies and FIIs while 19% is held by the public.


·         The company is setting up a new facility at Ahmedabad to manufacture large size bearings that cater to growing sectors of wind energy, mining, steel and off-road applications. This greenfield plant is at an investment of Rs.270 crore and is expected to start manufacturing by first quarter of 2009.


·         Once this large size bearings plant goes on stream, the company's expanded product line ensures that its dependence on the automobile sector, especially the two-wheelers segment, will automatically go down, thereby expanding its basket of reach and risk. This plant will supply to both the domestic as well as export market.


·         The global demand for large size bearings is on the upswing. The fact that its parent company, SKF, is putting up a similar plant in China and is also expanding its facilities at its Swedish factory reiterates the growing demand scenario.


·         SKF India is also investing another Rs.150 crore in setting up a new plant at Haridwar, Uttarakhand. This factory will cater mainly to the automotive and 2 wheeler industry.


·         The Uttarakhand plant is expected to become operational by March 2008 and will augment the existing bearings capacity by more than one-third.


·         2008 will once again be another landmark year for the company. Once the new plant at Uttarakhand also starts contributing to the bottomlines, the profit margins would surpass that posted in 2007 also.


·         2009 is also another year to look forward to as the new large bearings plant, which has higher margins, will also go on stream.


·         By 2011, the company has stated that it hopes to double its turnover from the present levels.


·         Currently quoted at Rs.350, on the historic EPS of Rs.30.50, the stock is discounted below 12 times, which is lower than the industry average.


·         CY08 may see a topline of Rs.1,850 crore with a PAT of Rs.210 crore resulting in an EPS of close to Rs.40, discounting the present price by less than 9 times.


·         SKF India is a bargain buy in today's market. The stock is a long term investment and one can safely expect a 40% return from the present rate, over the next 10 – 12 months

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