Buy NRB Bearings; target of Rs 157 : Dolat Capital Market

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Dolat Capital Market's research report on NRB Bearings

NRB Bearings (NRB) is the largest manufacturer of needle roller bearings in India, with ~70% market share. With an increased emphasis on weight reduction in vehicles and lower space utilisation, applications for needle roller bearings will continue to increase. In the past two years, slowdown in OEMs demand, both in India and global markets, impacted NRB bearing earnings. However, we sense that the worst is behind and forecast strong earnings growth over the next 2-3 years. NRB’s growth story is premised on (1) Strong volume growth in OEMs (account for ~65-70% of revenue), (2) Revival in exports, led by a recovery in the US and European truck /PV markets (~20-24%% of revenue), (3) improvement in Operating margin led by increasing presence in high-margin export business and benefit of operating leverage and (4) Reduction in debt along with fall in interest cost.

Outlook

We expect revenue CAGR at 19% and EBITDA CAGR at 41% over FY21-23E. We value the stock Rs 157 (based on 17x for FY23E EPS).

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