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Date: 2015-03-17

Timken - Focused play on Railway, CV segment: ICICIdirect

Timken is the fourth largest bearing manufacturer in India with a revenue market share of ~8%. In India, it manufactures tapered bearings (which forms ~62% of the topline) catering to mobile industries (rail, CVs, offhighways). Furthermore, ~31% of sales are from traded goods, which essentially comprise imports of larger sized tapered, spherical and cylindrical roller bearings from its group companies. In terms of segmental bifurcation of revenues, Timken derives ~22% of its revenues from Railways, 30-32% from exports, 25% from industrial and aftermarket and balance from CVs, UVs and tractors.

Railways form ~22% of the topline of Timken. It specifically caters to the freight segment, high speed trains and locomotive segment of railway bearings demand and is a leader in the same. As per the management, 70% of existing wagons need to be replaced. Therefore, larger opportunities in this segment would flow through once the new wagon ordering gains momentum. Furthermore, it also expects an increase in railways bearing demand fuelled by the DFC completion, increase in freight volume and transition to heavy haul volumes.

Backed by Philadelphia Gears' (acquired by parent in 2011) know-how, Timken India also set up a gear box repair facility in Raipur to serve the heavy process industry segment covering metals (steel and aluminium), cement, power generation, and mining industries. While this segment is not served by any organised players, the management pegs the opportunity at ~Rs 2500 crore in India. Therefore, Timken has the vision to set up six such facility at various industrial zones in the long run with an aggregate sales opportunity of ~Rs 600 crore.

"With strong earnings momentum in 9MFY15 (PAT growth of 112% YoY) and huge opportunity, the stock is currently trading at 51x TTM earnings", says ICICIdirect.com research report.
(Money Control)


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