skf india

5th Floor, Crescent Chamber, Tamarind Lane, Fort, Mumbai - 400 001, India T: +91 22 2265-2626, F: +91 22 2265-1642

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Aegis Logistics Ltd.

Company Overview : SKF Group is the leading global supplier of products,

solutions and services spanning rolling bearings, seals, , services and lubrication

system.SKF was founded in 1907 and very rapidly developed a global presence. By

1920,the company was well established in Europe, North and Latin America, Asia and

Africa. Today, the group is represented in more than 130 countries, with more than 100

manufacturing sites and about 15,000 distributor locations. The SKF Group started its

operations in India in 1923 with its trading arm and in 1961 expanded its footprint by

incorporating SKF India (SKF) Ltd which started its production unit in 1965. Currently,

the parent company holds 53.58% in SKF India. The Indian subsidiary contributes

around 20% of the group’s Asian business which in turn contributes around 26% of the

group’s total business. SKF has a pan India footprint consisting of 6 manufacturing

facilities, 12 offices, a supplier network of over 300 distributors and an employee base of

more than 2600 dedicated professionals.

SKF has consolidated its operations in three different companies

INVESTMENT RATIONALE:- SKF India has well diversified business model both in

terms of segments as well as customers. No single customer contributes more than 10 % of

the revenue which makes SKF India less dependent on single customer.SKF India is the

major supplier of bearing to the automotive segment. We believe domestic automotive

industry has huge potential for growth in coming years which would lead SKF India to

drive growth. Auto Industry is expected to invest up to Rs 80,000crore in fresh capacity in

the next four years. These investments by automakers is set to trigger expansion of

capacities by component suppliers and the components industry. The company is also

present now in high end bearings for off highway customers which will drive demand as

newer and larger players are coming in India

We expect Industrial Business of SKF India to remain subdued in Fiscal 2013-14.However

improvement in the macro scenario in the next Fiscal could lead the Industrial business to

grow.

VALUATION:- SKF India has a strong cash reserve and has maintained a positive free

cash flow in last few years.Further SKF India is a zero long term debt company which

keeps it financial strong and doesn’t cause any interest burden.

RISK AND CONCERN:- Increase in raw material prices could affect the profitability of

the company. Delay in project approval from the government could affect the industrial

segment of the company. Delay in the economic recovery.

SKF India Limited

SKF Technologies (India) Pvt. Ltd

Lincoln Helios India Ltd

Market Data CMP 448

52 Week High 690(03-OCT-12)

52 Week Low 432 (08-AUG-13)

Book Value 472 (Cr)

Mcap (Rs Cr) 1290(Cr)

EPS 19.14

Enterprise Value 1677 Cr

Face Value 10

BSE Code 500472

NSE Code SKFINDIA

Share Holding Pattern

June -13 March-2013

Promoter and

Promoter Group 53.58% 53.58%

FII 16.58 17.32%

DII 15.26 14.66%

Non Institutions 14.31 14.44%

Total 5,27,32,538 5,27,32,538

Promoter,s Group Holding Name of

Promoters

% of

Holding

No of Shares

Held

AB SKF 46.72 2,46,39,048

SKF UK Ltd 6.45 34,02,000

SKF Forvaltning AB

0.40 31,53,500

Dividend History DIVIDEND DATE DIVIDEND PAID

23-Apr-2013 7.50

10-Apr-2012 7.50

27-Apr-2011 6.00

27-Apr-2011 1.00

07-Apr-2010 4.00

Industry: INDUSTRIAL GOODS Recommendation: Buy

CMP: Rs.448 Investment Period :-12 Months

TARGET :- 630 12-AUG-2013


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INDUSTRY UPDATE

The global bearings market is generally seen as the

worldwide sales of rolling bearings, comprising ball and

roller bearing assemblies of various designs, including

mounted bearing units.

The automotive original equipment bearing markets,

including two- and four-wheelers, accounted for more than

30%. The industrial original equipment bearing markets

accounted for almost 40% of world demand and included

manufacturers of light and heavy industrial machines and

equipment, as well as aerospace, off-highway and railway

vehicles. Sales through distributors (industrial distribution

and the independent vehicle aftermarket) maintained around

30% of world bearing demand, of which around 30% is

related to the vehicle service market and around 70% to the

industrial market.

Asia’s share of the world bearing market was relatively

unchanged and accounted for almost 50% of the world

bearing market, compared with less than 30% ten years ago.

China’s share of the world bearing total market was slightly

down to about 25%. Japan’s share of the world bearing

market increased slightly, but domestic Japanese bearing

demand still accounts for less than 15% of the world total.

The Chinese bearing market, which remains the largest of the

emerging markets, is very fragmented, with the main

international bearing companies accounting for about one

third of the market while the other two thirds of the market

consists of a host of local manufacturers. Some of the largest

include: Wafangdian (ZWZ), Luoyang (LYC), Harbin

(HRB), Zhejiang Tianma (TMB), Wanxiang Qianchao, and

C&U.

Europe accounts for 25% of the world market total with

Germany alone accounting for almost 10%. The Americas

now represent slightly more than 20% of global demand, of

which the USA, Canada and Mexico together account for

about 80%. In South America, Brazil is the major market and

makes up more than 60% of regional demand.

Radial deep groove ball bearings are the most common

rolling bearing type, accounting for almost 30% of the world

bearing demand. Other major ball bearing types include

angular contact ball bearings, self-aligning ball bearings,

thrust ball bearings and automotive wheel hub ball bearing

units, accounting for over 10% of total world bearing

demand. Roller bearings account for less than half of

worldwide rolling bearing sales.

Roller bearings are named after the roller shape, such as

cylindrical roller bearings, needle roller bearings, tapered

roller bearings and spherical roller bearings. All of these are

available for loads acting across the shaft (radial bearings)

and for loads that are parallel with the shaft (thrust bearings).

There are also bearings that contain both balls and rollers


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INDIA BEARING INDUSTRY: HIGH IN DEMAND

The Indian Bearing industry has grown steadily over the past

few years. The industrial segment has evolved rapidly since

the time of industrial revolution and is regarded as the main

hub of modern machineries. The bearing industry plays a

crucial role in the automotive sector. The increase in the

demand for high-speed engines & machineries, spanning over

a large section of industry, has created a fresh challenge for the

bearing industry.. The bearing industry has evolved

significantly due to the expansion of production units in India.

The India bearing industry manufactures over 500 varieties of

bearings. Considering this figure, the industry has a lot of

scope for growth and development. The current Indian bearing

industry is worth Rs.3,500 crores. In this, automotive segment

accounts for 45% of the revenues, which amounts to Rs.1,350

crores and the remaining 55% is influenced by other industries

through imports. Considering the growth of automotive

industry as well as other industries, India has a lot of potential

to expand its business. The industry is expected to grow by

leaps and bounds in the coming years. Due to high demand of

commercial vehicles and two wheelers in India, the

automotive sector is here to play an important role for the

bearing industry.

Globally speaking, China continues to manufacture low-priced

bearings and replacing them with lucrative and reliable

bearings. Indian manufacturers are facing a serious threat as

this affects their growth and market share.

At present, the India industry manufactures small and medium

bearings mainly in five categories: ball bearings, cylindrical

roller bearings, taper roller bearings, spherical roller bearings

and needle roller bearings. The bearings are manufactured

taking into consideration the designs and specifications needed

by various industries. There has been an increase in the

demand of automotive bearings in India but its rate of growth

has been much sluggish as compared to the automobile

industry. The bearing manufacturers are expecting a sustained

growth of 15% mainly due to the rise in the number of two

wheelers, passenger cars and utility vehicles. However,

commendable efforts have been made by some manufacturers

to design and develop bearings, particularly large diameter ball

and roller bearings to suit specific customer requirements.

MARKET SHARE

SKF INDIA FAG

BEARINGS

P/E 17.67 17.75

P/BOOK VALUE 2.91 3.22

EV/EBITDA 9.34 9.90

EV/EBITD 10.78 11.18

DIVIDEND YIELD 1.18 0.29

EPS 36.05 95.78

BOOK VALUE PER SHARE 219.11 527.92

ROE % 17.55 19.83

ASSET TURNOVER (X) 1.54 1.46

INVENTORY TURNOVER(X)

9.07 10.25

RECEIVABLE DAYS 52.68 54.84

INVENTORY DAYS 40.26 35.60

PAYABLE DAYS 58.05 56.06


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BUSINESS MODEL

STRONG CLIENTS

In terms of customers, the company has business relationship with almost all the

top players of the respective segment. In the automotive segment it has clients like Tata Motors,

Maruti, M&M, Hero, Bajaj, Toyota, Honda, Yamaha, Ford, Bosch, etc.While in the industrial

segment, it caters to prestigious clients like Coal India, Tata Steel, Lafarge, NTPC, Suzlon,

BHEL, GE, Cummins, ABB, ONGC, ITC, Unilever, etc.

SKF INDIA

AUTOMOTIVE

OEM REPLACEMENT

MARKET

INDUSTRIAL

OEMREPLACEMENT

MARKET

AU

TO S

EGM

ENTS

Maruti

M&M

Hero Moto

Bajaj Auto

Toyota

Honda

Yamaha

Ford

Bosch

Tata Motors

IND

UST

RIA

L

Coal India

Tata Stee

NTPC

Suzlon

BHEL

Cummins

ABB

ONGC

ITC

Unilever


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PRODUCT OFFERINGS

PRODUCT OFFERING

BEARINGS

LUBRICATION

SYSTEMSEALS

PRODUCT OFFERING

BEARINGS :- A bearing is a machine element that

constrains relative motion between moving parts to only

the desired motion. The design of the bearing may, for

example, provide for free linear movement of the

moving part or for free rotation around a fixed axis; or,

it may prevent a motion by controlling the vectors of

normal forces that bear on the moving parts. Many

bearings also facilitate the desired motion as much as

possible, such as by minimizing friction. Bearings are

classified broadly according to the type of operation, the

motions allowed, or to the directions of the loads

(forces) applied to the parts.

LUBRICATION SYSTEM:- SKF lubrication

solutions range from specialized lubricants to state-of-

the-art lubrication systems. Integrated SKF lubrication

solutions combine our expertise in bearings, seals and

condition monitoring with our tribology knowledge –

the study of friction, wear and lubrication. You can also

count on leading technical support and services. This

includes lubrication management programmes to help

with lubricant selection, planning and monitoring – all

from a single, reliable partner.


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We, at Lalkar Securities Pvt. Ltd., have prepared this report based on the data we consider reliable, but we do not vouch it to be accurate or complete, and

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Disclosure of Interest 1. The analysts who have prepared the report have in no way received or are expected to receive any compensation from the subject company.

2. The analysts may or may not hold any position in the subject company’s stock, as on the date of release. 3. Neither the company nor an affiliate company Lalkar Securities Pvt. Ltd. has received a mandate from the subject company.

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