Firstcall recommends to 'Buy' SKF India after Q1CY15 net profit jumps 4.36% y/y to Rs512.4m

1. CMP 1375.05
Target Price 1510.00
ISIN: INE640A01023
APRIL 29th
2015
SKF INDIA LTD
Result Update(PARENT BASIS): Q1 CY15
BUYBUYBUYBUY
Index Details
Stock Data
Sector Industrial Goods
BSE Code 500472
Face Value 10.00
52wk. High / Low (Rs.) 1540.35/790.00
Volume (2wk. Avg.) 8022
Market Cap (Rs. in mn.) 72506.39
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS CY14A CY15E CY16E
Net Sales 24156.00 26330.04 28436.44
EBITDA 3601.20 3951.11 4262.96
Net Profit 2027.70 2240.02 2427.80
EPS 38.45 42.48 46.04
P/E 35.76 32.37 29.87
Shareholding Pattern (%)
1 Year Comparative Graph
SKF INDIA LTD BSE SENSEX
SYNOPSIS
SKF India Ltd is a leading global supplier of
bearings, seals, mechatronics, lubrication
systems, and services which include technical
support, maintenance and reliability services,
engineering consulting and training.
During Q1 CY15, the company net profit jumps to
Rs. 512.40 million against Rs. 491.00 million in
the corresponding quarter ending of previous
year, an increase of 4.36%.
Revenue for the quarter rose by 1.06% to Rs.
5856.30 million from Rs. 5794.70 million, when
compared with the prior year period.
In Q1 CY15, EBIDTA is Rs. 935.60 million as
against Rs. 882.60 million in the corresponding
period of the previous year, grew by 6.00%.
During the quarter, PBT was up by 3.82% to Rs.
779.10 million from Rs. 750.40 million in the
corresponding period of the previous year.
EPS of the company stood at Rs. 9.72 a share
during the quarter, registering 4.36% increase
over previous year period.
Net Sales and PAT of the company are expected to
grow at a CAGR of 8% and 13% over 2013 to
2016E respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
SKF India Ltd 1375.05 72506.39 38.45 35.76 5.12 100.00
AIA Engineering Ltd 1149.50 108421.30 37.55 30.61 89.26 300.00
HEG Ltd 215.00 8591.20 20.41 10.53 0.93 60.00
Graphite India Ltd 82.85 16186.90 5.78 14.33 0.93 175.00

2. QUARTERLY HIGHLIGHTS (PARENT BASIS)
Results updates- Q1 CY15,
SKF Group is the leading global supplier of products,
solutions and services within rolling bearings, seals,
mechatronics, services and lubrication systems,
reported its financial results for the quarter ended
31st Mar, 2015.
Months Mar-15 Mar-14 % Change
Net Sales 5856.30 5794.70 1.06
PAT 512.40 491.00 4.36
EPS 9.72 9.31 4.36
EBITDA 935.60 882.60 6.00
The company net profit jumps to Rs. 512.40 million against Rs. 491.00 million in the corresponding quarter
ending of previous year, an increase of 4.36%. Revenue for the quarter rose by 1.06% to Rs. 5856.30 million from
Rs. 5794.70 million, when compared with the prior year period. Reported earnings per share of the company
stood at Rs. 9.72 a share during the quarter, registering 4.36% increase over previous year period. Profit before
interest, depreciation and tax is Rs. 935.60 millions as against Rs. 882.60 millions in the corresponding period of
the previous year.
Break up of Expenditure
Break up of Expenditure
Rs in Million
Q1 CY15 Q1 CY14
%
Change
Cost of material
consumed
1635.20 1575.20 4%
Purchase of stock in
trade
2331.40 2123.70 10%
Employee benefits
expenses
510.00 513.70 -1%
Depreciation &
amortization expenses
156.50 132.20 18%
Other Expenditure 1074.60 988.50 9%

3. COMPANY PROFILE
SKF is a leading global supplier of bearings, seals, mechatronics, lubrication systems, and services which include
technical support, maintenance and reliability services, engineering consulting and training. SKF is represented
in more than 130 countries and has around 15,000 distributor locations worldwide.
SKF Group started trading operations in India in Kolkata in 1923 and since then the Group's operations have
been consolidated into SKF India Limited. SKF India also has an associate company called SKF Technologies
(India) Pvt. Ltd providing Sealing Solutions and Industrial Bearings. The company has manufacturing plants in
Pune, Bangalore, and Haridwar.
Products
Bearings, units and housings
Seals
Lubrication solutions
Linear motion
Actuation Systems
Magnetic bearings/PM motors
Maintenance products
Condition monitoring
Power Transmission products
Coupling systems
Test and measuring equipment
SKF Vehicle aftermarket
Services
Asset Management
SKF Business Consulting
Customer training
SKF Engineering Consultancy Services
SKF Logistics Services
Lubrication Services
Mechanical maintenance
Remanufacturing and maintenance services
Service contracts
SKF distributor network
SKF Solution Factory

4. FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at December 31, 2013-2016E
SKF India Ltd CY13A CY14A CY15E CY16E
EQUITY AND LIABILITIES
Shareholder's Funds
Share Capital 527.30 527.30 527.30 527.30
Reserves and Surplus 12227.70 13634.50 15761.48 17810.47
1) Sub Total - Net worth 12755.00 14161.80 16288.78 18337.77
Non Current Liabilities
Deferred Tax Liabilities 40.30 0.80 0.88 0.96
Long Term Provisions 219.80 270.20 294.52 315.13
2) Sub Total - Non Current Liabilities 260.10 271.00 295.40 316.09
Current Liabilities
Trade Payables 2510.70 3366.50 3837.81 4221.59
Other Current Liabilities 744.40 858.20 935.44 1000.92
Short Term Provisions 682.70 454.00 349.58 307.63
3) Sub Total - Current Liabilities 3937.80 4678.70 5122.83 5530.14
TOTAL EQUITY AND LIABILITIES (1+2+3) 16952.90 19111.50 21707.01 24184.01
ASSETS
Fixed Assets:
Tangible Assets 3763.50 3665.70 3958.96 4236.08
Intangible Assets 0.10 0.10 0.12 0.13
Capital work-in-progress 247.00 184.00 202.40 218.59
a) Sub Total - Fixed Assets 4010.60 3849.80 4161.48 4454.81
b) Long Term Loans and Advances 2535.40 2320.20 2552.22 2781.92
1) Sub Total - Non Current Assets 6546.00 6170.00 6713.70 7236.73
Current Assets
Inventories 2551.70 2929.50 3281.04 3576.33
Trade receivables 3297.50 3730.20 4125.19 4485.55
Cash and Bank Balances 3757.90 5347.50 6523.95 7698.26
Short-terms loans & advances 713.80 805.70 902.38 992.62
Other Current Assets 86.00 128.60 160.75 194.51
2) Sub Total - Current Assets 10406.90 12941.50 14993.31 16947.28
TOTAL ASSETS (1+2) 16952.90 19111.50 21707.01 24184.01

5. Annual Profit & Loss Statement for the period of 2013A to 2016E
Value(Rs.in.mn) CY13A CY14A CY15E CY16E
Description 12m 12m 12m 12m
Net Sales 22749.60 24156.00 26330.04 28436.44
Other Income 631.70 769.30 923.16 978.55
Total Income 23381.30 24925.30 27253.20 29414.99
Expenditure -20135.60 -21324.10 -23302.09 -25152.03
Operating Profit 3245.70 3601.20 3951.11 4262.96
Interest 0.00 0.00 0.00 0.00
Gross profit 3245.70 3601.20 3951.11 4262.96
Depreciation -494.40 -539.50 -582.66 -617.62
Exceptional Items -221.00 0.00 0.00 0.00
Profit Before Tax 2530.30 3061.70 3368.45 3645.34
Tax -863.10 -1034.00 -1128.43 -1217.54
Net Profit 1667.20 2027.70 2240.02 2427.80
Equity capital 527.30 527.30 527.30 527.30
Reserves 12227.70 13634.50 15761.48 17810.47
Face value 10.00 10.00 10.00 10.00
EPS 31.62 38.45 42.48 46.04
Quarterly Profit & Loss Statement for the period of 30th Sep, 2014 to 30th June, 2015E
Value(Rs.in.mn) 30-Sep-14 31-Dec-14 31-Mar-15 30-Jun-15E
Description 3m 3m 3m 3m
Net sales 6127.90 6153.80 5856.30 6149.12
Other income 200.00 216.10 335.10 355.21
Total Income 6327.90 6369.90 6191.40 6504.32
Expenditure -5304.70 -5628.10 -5255.80 -5485.01
Operating profit 1023.20 741.80 935.60 1019.31
Interest 0.00 0.00 0.00 0.00
Gross profit 1023.20 741.80 935.60 1019.31
Depreciation -135.30 -137.00 -156.50 -159.63
Profit Before Tax 887.90 604.80 779.10 859.68
Tax -301.40 -196.00 -266.70 -288.85
Net Profit 586.50 408.80 512.40 570.83
Equity capital 527.30 527.30 527.30 527.30
Face value 10.00 10.00 10.00 10.00
EPS 11.12 7.75 9.72 10.83

6. Ratio Analysis
Particulars CY13A CY14A CY15E CY16E
EPS (Rs.) 31.62 38.45 42.48 46.04
EBITDA Margin (%) 14.27% 14.91% 15.01% 14.99%
PBT Margin (%) 11.12% 12.67% 12.79% 12.82%
PAT Margin (%) 7.33% 8.39% 8.51% 8.54%
P/E Ratio (x) 43.49 35.76 32.37 29.87
ROE (%) 13.07% 14.32% 13.75% 13.24%
ROCE (%) 29.32% 29.24% 27.83% 26.61%
EV/EBITDA (x) 21.18 18.65 16.70 15.20
Book Value (Rs.) 241.89 268.57 308.91 347.77
P/BV 5.68 5.12 4.45 3.95
Charts

7. OUTLOOK AND CONCLUSION
At the current market price of Rs.1375.05, the stock P/E ratio is at 32.37 x CY15E and 29.87 x CY16E
respectively.
Earning per share (EPS) of the company for the earnings for CY15E and CY16E is seen at Rs.42.48 and
Rs.46.04 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 13% over 2013 to 2016E
respectively.
On the basis of EV/EBITDA, the stock trades at 16.70 x for CY15E and 15.20 x for CY16E.
Price to Book Value of the stock is expected to be at 4.45 x and 3.95 x for CY15E and CY16E respectively.
We recommend ‘BUY’ in this particular scrip with a target price of Rs.1510.00 for Medium to Long term
investment.
INDUSTRY OVERVIEW
Amidst continued challenges on several fronts on the economic environment, 2014 ended on a note of cautious
optimism and hope for a better future. The economy continued on the same volatile path as previous period.
Softening but persistent inflationary pressure, continued stable but high interest rates presented growth
challenges across sectors. Manufacturing and industrial activity remained sluggish for a large part of the year as
demand did not take off across most sectors with exception of few. The confidence in business environment
remained low for most part of the year, reflected in low investments and low capacity utilization.
The economic environment witnessed a change in the middle of the year with the election of a new stable
government at the center. The business confidence and optimism returned to the corporate dialogue towards the
end of the year even as the overall economy improved only marginally.
The bearing market in India is served from both domestically produced and imported bearings. The Indian
bearings market is estimated to be INR 85 billion. The demand for the bearings is driven by the two key user
segments as - the automotive and industrial sectors. OEM and end users across industrial and automotive sectors
were impacted by the prevailing economic environment. During the year, core sector performance remained
unchanged while some showed deceleration of the negative trend and few others posted very moderate growth.
Outlook
While economy pundit’s project a gradually recovering world economy, if some of the forecasts hold true, India
will become the fastest growing large economy of the world in 2015. Government initiatives such as ‘Make in

8. India’ coupled with the new governance regime will boost confidence of global investors and act as a catalyst for
overall growth of the industry.
The growth momentum in India is expected to be driven by focused spending on development projects in the
form of increased public spending on infrastructure development. This will become the engine for driving several
sectors of economy and lead increased industrial activity.
Modernization and expansion of railways, inviting private sector players in defence production and reopening of
mines is likely to foster growth in the segment and allied industries.
The Company is well-poised to reap the benefits of uptrend in manufacturing sector as well as increased
government spending on key infrastructure projects. With its diverse range of products, its proven leadership in
providing continued higher-value to customers, the market leadership of SKF brand, and its wide reach and
presence, Company is prepared to contribute positively to the growth and progress of the industry.
Disclaimer:
This document is prepared by our research analysts and it does not constitute an offer or solicitation for the
purchase or sale of any financial instrument or as an official confirmation of any transaction. The information
contained herein is from publicly available data or other sources believed to be reliable but we do not represent that
it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be
in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for
the recipients’ investment decision based on this document.

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