Buy NRB Bearings; target of Rs 160: ICICI Direct

ICICI Direct's research report on NRB Bearings

We upgrade NRB Bearings from HOLD to BUY on reasonable valuations (19x FY19E earnings) and an improving growth outlook from its key segment – automotive and the after-market segment. The auto/ industrial bearings space has recently witnessed a number of deals at premium valuations. For example, German industrial and automotive supplier Schaeffler Group announced a merger of its Indian entities Schaeffler India Ltd (formerly Fag Bearings India Ltd), INA Bearings India Pvt Ltd and LuK India Pvt Ltd. The latter companies i.e. INA Bearings India Pvt Ltd and LuK India Pvt Ltd are proposed to merger with Schaeffler India Ltd at an implied price to earnings multiple of 50.9x and 43.1x, respectively. On EV/sales, the implied valuation was at 3.5x and 3.6x, respectively.

Outlook
We marginally revise our earnings estimate upwards to account for better growth in FY19. Thus, we now estimate topline and bottomline growth of 9.8% and 14.2% CAGR, respectively, over FY17-19E. We now value the company at 22x FY19E EPS of Rs 7.3 to arrive at a target price to Rs 160. We have a BUY recommendation on the company.

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