SKF India Ltd. has given a 115% return on a year on year basis as the Auto Ancillary Stocks have rallied on recovery of the Auto sales in the current financial year 2014-15. We had published the analysis when the stock was trading at Rs.665 per share and the current market price of the stock is at Rs.1091 per share.
SKF India Ltd. (SIL) is a subsidiary company of Aktiebolaget Svenska Kullagerfabriken (AB SKF) from Sweden. AB SKF started operations in the year 1907 with Ball Bearings as the product and later expanded manufacturing bases across the globe along with product diversification. SKF opened its first branch office in India in the year 1923 during the time Britain ruled in India.
SIL has a well-diversified product range with Bearings, Seals, Lubrication solutions, Linear motion Systems, Actuation Systems, Magnetic Systems, Maintenance products, Coupling Systems, Power Transmission Systems, Test and Measurement Equipment and Vehicle Aftermarket products. The company is also well diversified in terms of the business segment it caters and the customers it supplies products to, which acts as a hedge against any slowdown in a particular segment. Automotive segment contributes 42% to the revenues of the company followed by the other segments like agriculture, mining, steel, construction, food and beverage, home appliances, pulp and paper, solar and wind energy, pumps and gear box that all contribute 50% to the revenues while the remaining 8% comes from exports. The company has business relationships with almost all top players of the respective segment with clients like Tata Motors, Maruti Suzuki, Mahindra and Mahindra, Hero, Bajaj, Toyota, Honda, Yamaha, Ford and Bosch in the Automotive Segment. No single customer contributes more than 10% to the revenues of the company.
SIL is the largest manufacturer of bearings in India with a 35% market share. The closest competitor to SIL is FAG Bearings with a 20% market share with a smaller revenue base in comparison. The main contribution of exports for SIL comes from Europe followed by the US with customers from the Automotive segment. SIL has manufacturing bases located in Bangalore, Pune and Haridwar with combined capacity of 1,80,947 bearings with 300 distributors and more than 14,000 retailers across India. The company has started supplying products even to the Off-highway segment that consists of Earthmovers and heavy equipment machinery.
The Company reported Sales of Rs.22041 million with an EBITDA of Rs.2350 million and a net profit of Rs.1900 million in CY 2012. The EBITDA margin was 10.19% and the net profit margin was 8.6% for CY 2012. The company reported a net profit of Rs.466 million with revenues of Rs.5727 million for the quarter ended September 2013. The Earnings per share was reported at Rs.36 and the Return on Capital Employed (RoCE) was reported at 25% and the Return on Equity at 16% for CY 2012.
The company had no debt at the end of CY 2012 and has a current market capitalization of Rs.35,000 million with a Price to Earnings multiple of 18.44 at Rs.665 per share. The Price to Book Value is 3.03 and the Market Capitalization to Sales ratio is 1.58. SIL had last declared a dividend of 75.00% of Rs.7.5 per share for the year ended March 2013. The Promoters have a shareholding of 53.58% and the FIIs have a shareholding of 16.36% in the company.