Buy NRB Bearings, target price Rs 150: ICICI Direct

ICICI Direct has buy call on NRB Bearings with a target price of Rs 150. The current market price of NRB Bearings Ltd. is Rs 120.6.

NRB Bearings Ltd., incorporated in the year 1965, is a Small Cap company (having a market cap of Rs 1156.29 Crore) operating in Auto Ancillaries sector.

Financials
For the quarter ended 31-12-2020, the company reported a Consolidated sales of Rs 244.69 Crore, up 23.79 % from last quarter Sales of Rs 197.67 Crore and up 33.65 % from last year same quarter Sales of Rs 183.08 Crore Company reported net profit after tax of Rs 23.28 Crore in latest quarter.

Investment Rationale
NRB’s performance is largely correlated to the domestic auto segment as ~70% of the topline comes from domestic OEMs. The past two quarters showed signs of a strong recovery. Further auto volumes in January also came in strong. Also, even with a rise in steel prices, the brokerage expects NRB to emerge with EBIDTA margins of 15.7% for FY22E & FY23E led by positive operating leverage. It introduces FY23E and build in revenue, EBIDTA and PAT CAGR of 8.9%, 22.3% and 36.5%, respectively, in FY20-23E. It estimates an EPS of Rs 8.4/share for FY23E that implies earnings yield of 7% at CMP. Reflecting the improved outlook for NRB, it upgrades the target price to Rs 150/share (earlier Rs 110) and maintain BUY rating on the stock.