FAG India Bearings (BSE code 505790)
It is a member company of FAG group of Germany which is a leading player in the Indian bearing industry; The company’s topline and bottomline in the last 5 years has grown briskly at 50.12 per cent and 38.25 per cent CAGR respectively. For 9MCYO8, the company on YoY basis has recorded the topline and bottomline growth of 18.86 per cent and 55.73 per cent respectively. However, decline of the steel prices, which form a basic raw material for the bearing industry; will further enhance the company’s
operating margins. FAG India Bearings is a zero-debt company which is the second largest listed player in the Indian bearing industry in terms of the turnover as well as the market cap. It also enjoys better profit margins as compared to its listed peers. One has to note that the volume in this counter hasn’t been something to talk about. However, despite the aggressive selling by the FIls of their holdings across many companies, this counter has been an exception. On the valuations front, the counter is currently available at a P/E of 4.39x considering its trailing 12 months earnings and at a P/BV of 1.21 x. The slowdown in demand from the user industry might affect the company’s future earnings. However, considering the company’s astonishing ROE of 25.44 per cent, you can think of taking a long-term exposure in the counter.
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