JUGANOO – Multibagger Idea

26 July 2010
ABC Bearings Ltd.

INVESTMENT IDEA

ABC Bearings Ltd. Investment Argument

ABC  bearings  Ltd.  is  amongst  the  leading  players  in  tapered 
Web: www.abcbearings.com
roller bearings, catering mainly to CV and tractor segments. The 
Risk Low product portfolio consists of tapered roller bearings, cylindrical 
Price (Rs.) 151.5 roller  bearings,  spherical  roller  bearings  and  grease.  It  has 
Market Cap (Rs.Crs.) 175 technology tie‐up with NSK, Japan, which gives it an edge over 
52 High / Low (Rs.) 156.50/36.20 competitors,  in  an  industry  which  is  technology  intensive.  They 
Sales/MCap 0.92 have  extended  this  tie‐up  to  2016.  Co.  is  also  having  a  JV  with 
Book Value (Rs.) 78.58 NSK – NSK ABC Bearings Ltd. 
BSE 505665  
NSE ANTFRIBEAR
The  manufacturing  capacity  is  72  lakhs  (nos.)  at  Bharuch 
Gujarat,  this  excludes  the  new  manufacturing  capacity  at 
Reuters ANTF.BO
Deharadun,  Uttarakhand,  which  has  commenced  production 
Bloomberg ABCL.IN
from  end  March  2010.  It  is  also  setting  up  another  new 
manufacturing facility for ‐ Slewing Bearing and large bearings, 
Key Financials
which  will  be  completed  by  this  year  end.  These  new  facilities 
(Rs Crores) FY09 FY10 %chg
will drive the top‐line growth for next couple of years. This also 
Gross Sales 133.86 160.54 19.9 suggests  that  management  expects  significant  demand  for  its 
PBIDT 26.32 35.93 36.5 products in coming years. 
Interest 10.95 0.70 -93.6  
Depreciation 5.04 4.23 -16.1 The  company  has  also  repaid  almost  all  the  foreign  exchange 
Net Profit 6.58 20.53 212.0 loans bringing down the interest cost drastically from Rs 11cr to 
EPS (Rs) 5.70 17.77 212.0 just Rs 70 lakhs & D/E is now just 0.05.  
CEPS (Rs) 10.06 21.44 113.1  
F.V. (Rs) 10.00 10.00 0.0 A  strong  recovery  in  the  CV  and  tractor  segment  and  capacity 
Dividend (%) 20.00 45.00 125.0 expansion  done  by  the  company,    suggests  a  sustained  growth 
Equity Capital 11.55 11.55 0.0 potential  and  we  expect  company  to  post  better  top  line  and 
PE (x) 26.59 8.52 -67.9 bottom line going forward. 
 
We expect around 30% growth in top‐line, [backed by expansion 
Shareholding Pattern
completed  in  Dehradoon  in  March’10]  and  over  45%  growth  in 
(%) Mar-10 June-10 chg
bottom‐line,  leading  to  FY’11  EPS  of  Rs  26/‐.  Looking  to  liberal 
Foreign 26.38 25.11 -1.27 payout trend of management and current year being 50th year of 
Institutions 6.50 5.63 -0.87 operation,  we  expect  a  liberal  bonus  too.  In  that  case  we  can 
Corp. Holding 6.73 7.32 0.59 expect a target of Rs 250/‐ in next 12 months.  
Promoters 32.08 32.08 0.00
Public&Others 28.32 29.87 1.55 Technical Trend
ABC BEARINGS (151.500, 156.650, 149.000, 151.550, +3.35001) 200
195
190
185
180
175
170
165
160
155
150
145
140
135
130
125
120
115
110
105
100
95
90
85
80
75
70
65
60
55
50
45
40
35
30
25
20
15
10
Relative Strength Index (88.0520) 90
80
70
60
50
40
30
20
10

Volum e (100,746) 40000

30000
20000
10000
x10
ct Nov Dec 2006 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2007 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2008 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2009 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 Mar Apr May Jun Jul Aug Sep O

Anand Rathi Research

 JUGANOO – Multibagger Idea
26 July 2010
ABC Bearings Ltd.

INVESTMENT IDEA

ABC Bearings Ltd. Background

ABC  bearings  Ltd.  is  a  leading  OEM  supplier  to  the  automotive 
industry  domestically  and  overseas  market.  This  year  the 
company completes 50 years of long journey.  
 
The  company  caters  to  automotive  industry  in  segments  like 
commercial  vehicle,  tractors  and  other  industrial  sectors  also. 
The  products  consist  of  taper  roller  bearings,  cylindrical  roller 
bearings, spherical roller bearings and grease.   
 
Projections The plant locations of the company are at Bharuch, Gujarat state 
and the newly commenced at Dehradun Uttarakhand state. The 
Key Financials
(Rs Crores) FY10 FY11E % chg production capacity for Ball and Roller Bearings is 72,00,000 nos 
excluding  the  Dehradun  capacity,  which  was  commissioned  in 
Gross Sales 160.54 212.00 32.1
end of March’2010.  
PBIDT 35.93 49.00 36.4
 
Other Income 3.83 4.50 17.5
The company has elite list of clients like ‐ TATA, Toyota, Carraro, 
Interest 0.70 1.50 114.3 Ashok  Leyland,  Mahindra,  Force,  TAFE,.  Though  top‐10 
Depreciation 4.23 5.50 30.0 customers contribute to the 80% of the revenue. 
Tax 10.35 12.00 15.9  
Net Profit 20.53 30.00 46.1 Bearings are sophisticated & precision products which are highly 
EPS (Rs) 17.77 25.97 46.1 technology  and  capital  intensive.  Quality  consistency  and  OEM 
CEPS (Rs) 21.44 30.74 43.4 approvals  are  must  for  product  demand  to  grow;  Company  is 
F.V. (Rs) 10.00 10.00 0.0 one  of  the  best  quality  producers  with  strong  technology  back 
Dividend (%) 45.00 60.00 33.3 up from NSK of Japan.  
Equity Capital 11.55 11.55 0.0  
PE (x) 8.52 5.83 -31.6 There  are  two  types  of  bearings,  ball  bearings  and  roller 
bearings. Roller bearings are of different types like tapered roller 
bearings, spherical roller bearings, cylindrical roller bearings and 
needle  roller  bearings.  They  are  used  in  CV’s  railways,  tractors 
and heavy machinery. ABC caters to tapered roller bearings.. 
 
Risks and concerns
The imports of bearings by OEMs and traders from countries like 
China, Korea etc. at the dumping prices. 
 
Recommendation
We expect around 30% growth in top‐line, [backed by expansion 
completed  in  Dehradoon  in  March’10]  and  over  45%  growth  in 
bottom‐line,  leading  to FY’11  EPS  of  Rs 26/‐.  Looking  to  liberal 
payout  trend  of  management  and  current  year  being  50th  year 
of operation, we expect a liberal bonus too. In that case we can 
expect a target of Rs 250/‐ in next 12 months.

DISCLAIMER: This report has been issued by Anand Rathi Financial Services Limited (ARFSL), which is regulated by SEBI. The information herein was obtained from various sources; we do not
guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes an offer, or an invitation to make an offer, to buy or sell any securities, options, future or other
derivatives related to such securities (“related investment”). ARFSL and its affiliated may trade for their own accounts as market maker/ jobber and /or arbitrageur in any securities of this issuer(s) or in
related investments, and may be on the opposite side of public orders. ARFSL, its affiliates, directors, officers, and employees may have a long or short position in any securities of this issuer(s) or in
related investment banking or other business from, any entity mentioned in this report. This research report is prepared for private circulation. It does not have regard to the specific investment objectives,
financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial situation and the particular needs of any specific investing in any securities or
investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such
securities, if any, may fluctuate and that each security's price or value may rise or fall. Past performance is not necessarily a guide to future performance. Foreign currency rates of exchange may
adversely affect the value price or income of any security or related investment mentioned in this report

Anand Rathi Research