Even as the midcap index has returned more than 40% since January, a few stocks have run up by nearly 50% in the same period. One such stock, the shares of Timken India have run up by nearly 49% since January. HDFC Securities has a buy rating on the shares with a target price of Rs 1,054. Timken India shares closed at Rs 896.95 on NSE this afternoon. The brokerage firm’s target price implies an upside of nearly 18% from the current market prices.
“Timken India is among the leading manufacturers of tapered roller bearings in India. The acquisition of ABC Bearings has further strengthened its position in tapered roller bearings market and provided an entry into wheel-end bearing segment which is estimated to be Rs 400 cr market. Post-acquisition, ABC will get access to Timken’s manufacturing technology and design which could enhance productivity, improve product quality and lead to better pricing of ABC’s products. Timken would also be able to optimize its capacity utilization as ABC’s capacity is underutilized,” HDFC Securities noted in its report.
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In the same report, HDFC Securities noted that the company is slated to benefit from a rise in exports. “Higher procurement of LHB coaches by Railways where cost of bearings used is 2.5-3x, new wagon procurements for DFC, pick-up in segments like renewable, CVs & off-highway and demand from newer segments like Indian Navy are strong growth drivers. These will be met from the new capacities that are coming on stream post recent capex. TIL with a strong export market is likely to benefit from the expected increase in heavy truck sales in the North American market,” said HDFC Securities.
On the valuations front, the research firm says that the investors could buy the stock at the current levels and add-on dips. “At CMP of Rs 860 the stock quotes at 35.1x FY20E EPS. We feel investors could buy the stock at the CMP and add on dips to Rs 763-783 band (31.5x FY20E EPS) for sequential targets of Rs. 982 (40x FY20E EPS) and Rs 1054 (43xFY19E EPS) in 4-6p quarters. We have however not considered the merged financials for the purpose of this report,” said the research firm.