NRB Bearings has a number of top-notch shareholders, including Nalanda India Equity Fund, which holds 96 lakhs shares (10%), Catamaran Management (Narayana Murthy of Infosys) which holds 13.50 lakh shares and Ashish Dhawan, who holds 5.75 lakh shares.
In its latest research report, Crisil points out that NRB Bearings Ltd is the fourth largest organised bearings player in India. It manufactures customised bearings for leading domestic and global auto companies. Its strong engineering capabilities and customised product offering have ensured a steady relationship with its clients. Being positioned in the niche customised bearings segment, the company faces less competition from global bearing manufacturers such as SKF (Sweden), Timken (the US), who largely produce off-the-shelf bearings. As needle roller bearings constitute 50% of NRB Bearings’ revenues, it faces competition from the Schaeffler Group as the latter also produces needle roller bearings.
Crisil has assigned NRB Bearings a fundamental grade of ‘4/5’, indicating that its fundamentals are ‘superior’ relative to other listed securities in India.
Crisil expects NRB’s revenues to increase at a CAGR of 10.3% to Rs. 7.9 bn during FY13-16 led by a likely recovery in the domestic auto market in FY15 coupled with growth in exports. The EBITDA margin is expected to improve in FY15 – after dropping in FY14 – following recovery in demand. The PAT CAGR is expected at 11.9% as operational efficiencies kick in.
Valuations: CMP has strong upside
CRISIL Research has used the discounted cash flow method to value NRB Bearings and arrived at a fair value of Rs. 46. At the current market price of Rs. 36, the valuation grade is 5/5.