Earlier in a November note, Way2Wealth said Timken is most likely to gain from a cyclical recovery in its key segments over FY23-24, driven by large tender of 90,000 wagons by Indian Railways 
Earlier in a November note, Way2Wealth said Timken is most likely to gain from a cyclical recovery in its key segments over FY23-24, driven by large tender of 90,000 wagons by Indian Railways Shares of Timken India tanked 5 per cent in Friday's trade after rallying 20 per cent in the previous session on the company decision to set up a new manufacturing facility in Gujarat to manufacture Spherical Roller Bearings ('SRB') and Cylindrical Roller Bearings ('CRB') and components. Analyst targets on the stock are largely mixed, with the average target price standing at Rs 2,982, as per Trendlyne, suggesting a potential 12 per cent downside ahead.
The scrip decline 5.49 per cent to hit a low of Rs 3,322.10 on BSE. Despite this, the scrip is up 65b per cent year-to-date.
Analysts noted that has a strong parentage support and the Rs 600 crore capex further corroborates this, as it gains the technical knowhow of complex SRB/CRB.
Timken's parent recently acquired GGB Bearings, a leading player in metal-polymer bearings; and this could benefit Timken in the future, said Nuvama Institutional Equities, which noted that the company had focused on efficiency capex until now, but had indicated that it will not shy away from new plant capex should demand stay robust.
Timken India is a subsidiary of Timken Company which manufactures bearings in Ind. It has manufacturing plants in Jamshedpur and Bharuch.
Nuvama Institutional Equities said the capex is a major positive as it: imparts significant long-term revenue visibility beyond FY25 with the potential to double its existing revenues. Besides, it will likely to aid margins and provide a 200-300bp cushion by substituting low margin traded goods (25-30 per cent of revenue mix); and validates thesis of a strong demand environment and solid parentage support.
"The long gestation period for the capex limits us from calibrating its benefits in our FY24/25 estimates, but we reflect this with a higher P/E multiple of 55 times (earlier 50x) led by robust visibility. Retain ‘BUY’ with a revised target of Rs 3,750 from Rs 3,425 earlier and top pick status," Nuvama said.
Earlier in a November note, Way2Wealth said Timken is most likely to gain from a cyclical recovery in its key segments over FY23-24, driven by large tender of 90,000 wagons by Indian Railways, with additional volumes for DFC corridor and high speed rail rolling stock, cyclical uptick in CV volumes and shift in production lines by parent company to India in order to enjoy low cost benefits.
"Also, its business mix is superior to its peers due to low competition due to high share of exports/railways, lowest threat of EV disruption due to absence in 2W/PVs and a dominant share in their niche segments (differential and pinion bearings in CVs," it said.
ICICIdirect has a target of Rs 3,561 on the stock. JM Financial has a target of Rs 3,200 on the stock while Kotak Institutional Equities has a 'Sell' on the stock with a target of Rs 2,400!
Also Read: Brokerage Radar: Timken India, Glenmark, Titagarh Wagons, NMDC & Exide Industries
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