Buy This Auto Ancillaries Sector Stock For Double Digit Return In 12 Months: ICICI Direct

Leading brokerage firm, ICICI Direct has recommended investors to buy SKF India with a target price of Rs 5215 apiece. If you buy the stock SKF India at the current market price of 4505 apiece, you will get a potential return of 16% in 1-year. Check key takeaways about the mid cap stock below:

1. SKF India Q2 FY 23 Results

SKF reported decent Q2FY23 results. Revenue for the quarter came in at Rs 1078.3 crore (I-direct estimate of Rs 1105.9 crore), up 11.6% YoY, 2.2% QoQ. EBIDTA margins came in at 19.9% vs. 17.4% in Q1FY23.

Absolute EBIDTA came in at Rs 214.6 crore (I-direct estimate of Rs 201.3 crore), up 16.8% QoQ. Ensuing PAT came in at Rs 155.8 crore (I-direct estimate of Rs 141.7 crore) compared to Rs 129.2 crore in Q1FY23.

2. SKF India Stock Outlook And Return

The current market price of the stock is Rs 4505 apiece with 52-week high at Rs 5074 apiece and 52-week low at Rs 2984 apiece, respectively. The stock has given a return of 165% in last 5-years, 106% in last 3-years, and 16% in last 1-year.

3. Key Triggers For Future Price Performance

The focus is shifting towards indigenisation of industrial bearings. There is strong traction from railways, focusing on increasing market share in aftermarket products. It is Increasing its presence in Tier 3 cities, increasing market share in key segment.

4. SKF India Valuation

SKF has been making strides towards innovation and R&D and has made significant inroads in rotating equipment performance (REP). Going ahead, a recovery in CV, upcoming e-market & commencement of DFC should augur well for the company.

According to ICICI Direct, "We continue to remain positive and retain our BUY rating on the stock. We value SKF at Rs 5215 i.e. 40x P/E on FY24E EPS."

5. About SKF India

SKF India is one of the leading bearing manufacturers known for its deep groove ball bearings and has a presence across the industrial & auto sector. Auto & industrial have been contributing 50% each to SKF's topline over the years, with a slight tilt on either side depending on macros.

SKF boasts a debt free balance sheet, coupled with consistent RoCE & RoICs upwards of 20%.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.