Galaxy Bearings has neatly positioned itself among its peers (Timken, Shaeffer, NRB, SKP, Menon bearings) with respect to Net Asset turns, EBITDA margins and cash conversion days.
| Across 5 Yrs | Galaxy Bearings | Schaeffler India | Timken India | SKF India | NRB Bearings | Menon Bearings |
|---|---|---|---|---|---|---|
| Mcap (Cr) | 467 | 50,333 | 24,330 | 22,720 | 2,797 | 751 |
| PE | 25.8 | 54.6 | 67.9 | 47 | 25.6 | 25 |
| Gross M % | 50–55 | 38 | 40–47 | 40 | 60–65 | 60–65 |
| EBITDA M % | 15–20 (^) | 17–20 | 17-20 | 17 | 17 | 20–25 |
| Net M % | 13 (^) | 13 | 14 | 12 | 9 | 15 |
| ROE % | 16–23 (^) | 20 | 19 | 22.5 | 14.5 | 20–25 |
| Net Asset Turns | 9.92 (^) | 6.11 | 3.33 | 8–10 | 3 | 2.88 |
| Asset Turns | 1.23 | 1.2 | 1.1 | 1.35 | 0.88 | 1.2 |
| Rev Growth CAGR 3 yr % | 35 | 16 | 20 | 15 | 11 | 16 |
| EPS Growth CAGR 3 yr % | 42 | 33 | 17 | 26 | 47 | 31 |
| Cash Conversion Days | 102 (decreasing) | 66 | 124 | 69 | 292 | 121 |
Midcaps are valued 2x small-caps even with similar ROE’s. Most bearing companies are doing great post-covid with improving ROE’s. The growing manufacturing & automotive sector is providing impetus to the bearing industry.
I think Galaxy Bearings has comparable ROE’s, Gross margins & faster growth than the big players because Galaxy sells to other bearing makers, does aftermarket sales & services and mainly exports to other countries.
Few Questions:
- What is driving such profitability & growth for Galaxy?
- Do bearing manufacturers face raw material (steel) cost escalation (Raw material price risk)?
- What differences or advantages does the export market have over the domestic market, if there are any?
Galaxy Bearings has a huge 35 Cr capex for expanding bearing manufacturing capacity from 2.1 Mill/ Yr to 9.6 Mill/ Yr, a roughly 4.5x expansion, which shall be completed by early FY2025. Promoter has also been consistently increasing stake in the company. Most efficiency metrics are improving. Demand seems to be strong, as Schaeffler is also doing significant capex. Also, the stock has been in a long consolidation.
Disc: No position. Tracking.
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