Buy NRB Bearings, target price Rs 175: ICICI Direct

ICICI Direct has buy call on with a target price of Rs 175. The current market price of NRB Bearings Ltd. is Rs 134.1. Time period given by analyst is 12-18 months when NRB Bearings price can reach defined target.

NRB Bearings Ltd., incorporated in the year 1965, is a Small Cap company (having a market cap of Rs 1271.62 Crore) operating in Auto Ancillaries sector.

Financials
For the quarter ended 31-03-2021, the company reported a Consolidated Total Income of Rs 263.21 Crore, up 5.70 % from last quarter Total Income of Rs 249.02 Crore and up 36.93 % from last year same quarter Total Income of Rs 192.22 Crore. Company reported net profit after tax of Rs 35.29 Crore in latest quarter.

Investment Rationale
NRB’s performance is largely correlated with the domestic auto segment as ~70% of the topline comes from domestic OEMs. Hence, demand sustenance in the auto segment in the near term will be a key monitorable. The company has reduced its debt by Rs 97.8 crore in FY21. Going ahead, the brokerage expects positive operating leverage and price hikes to improve margins from 13.6% in FY21 to 16% & 16.5% by FY22E & FY23E, respectively. The brokerage build in revenue, EBIDTA, PAT CAGR of 17.2%, 29%, 32.2%, respectively, in FY21-23E. It estimates an EPS of Rs 9.8/share for FY23E, implying earnings yield of 7.5% at the CMP.