ABC Bearing

Indian Bearing industry comprises of 10 major players and several units in unorganised segment. Due to technology barriers, the industry is dominated by foreign players like SKF, FAG Bearing etc. and hence these players have high margins.

ABC Bearing is one of the largest player in tapered roller bearings which find usage in CV & Tractor industry. ABC has the technological collaboration with NSK, Japan and hence it has also developed a certain market share for itself. The co has a long standing relationship with automotive majors like Tata Motors, Ashok Leyland, Mahindra etc.

Comparison Chart:

If one analyses the financials of the company, the company has had high operating margins in the range of 20-25%. Between FY 2002 and FY 2007, the company had grown steadily from 65 to 182 Cr turnover and had very strong profitability. In FY 2008 & 2009, the CV industry went through a rough phase and so did the company had a decline in turnover and profitability. Now the CV segment is back to strong growth and ABC should do well. Based on the last few quarter numbers, the company is already posting all time high turnover (200 Cr annualised).


  1. The co has constructed a new factory in Uttarakhand in a record time of 4 months. The plant was inaugurated on 28th March, 2010. This plant will primarily cater to the Ashok Leyland’s Uttarakhand plant. Sales growth should start coming up in next few quarters.
  2. The co is setting up another manufacturing facility for – Slewing Bearing & Large bearing. This is expected to get completed by end of this year.

Valuations at CMP of 155:

  • For FY 2011, the company is expected to post a turnover of 205 Cr+. i.e.. a growth of more than 25%
  • For FY 2011, the co may be able to post a NP of more than 25 Cr+, hence an EPS of more than 22.
  • Stock is trading at about 7 times expected FY 2011 earning.
  • The co has consistent record of high dividend pay-out of 25-30%. Last year the company paid a dividend of 45%.
  • Co has enjoyed high ROCE of 30%+ consistently.
  • Its almost a debt free company. Co repaid a loan of about 50 Cr in FY 2010.

If one looks at the valuations of bigger players in the industry like SKF, NRB, FAG Bearing etc, they trade at 15-20 PE.

Given the strong growth prospects for the company ahead over next 1-2 years, it seems to be a good growth story at attractive valuations.

Company Website

16 thoughts on “ABC Bearing”

    1. Hi Rishant,

      We haven’t updated the performance sheet as of now.

      The outlook for the company is intact…lets see how they deliver in Q2.


  1. Thanks Ayush.
    Do you track ACE (Action construction equiqpment)?

    The company has good capex plans and have given pref shares to Rel Cap and its in infrastructure.

    Last qtr results were good. May continue in future too.

    1. Hi,

      The co has come out with Q2 nos today. The growth which the investors were expecting is missing.

      Otherwise the results are decent.


          1. Ayush,
            Is there any chance that you can speak to Management and try to get the information on sept qtr results? That way we know why the growth was not there as they have the Highest margins and still fell short.

            The stock has been falling after that. If the story is good then I can avg out.
            But b4 that I want to make sure the stock is intact as the Div payout is also very healthy.

            Worry part – Will this stock be a underperformer if the Auto Industry goes in a slump (chances of that seem remote as of now)

            pls suggest.

          2. Hi Rishant,

            A friend of mine has informed that there was a delay in starting of production at the new plant deheradun due to some regulatory approvals. The same is expected to start in the month of Dec.

            The company is good with the strong cash flows but the growth needs to come for the stock to get re-rated.


      1. Ayush,
        Can we consider this as a 1 bad qtr? as the company finished their expansion and was operational in Mar 2010. The order intake should have been high due to booming auto sector and they have one of the highest margins in the industry.

        I have to yet look at the results in detail. But on positive side the stock has not gone that bad. May be market is expecting better numbers next qtr.

        1. Hi,

          Yes, may be the order booking is taking time. Lets wait for more details.

          In between, the results are not bad but in short term the triggers are not much.


  2. hi Ayush, the company came with the Q3 results today, and they seemed pretty ok. But, it seems that they still have not been able to start the new plant, as the depreciation is flat QoQ, and so are sales. Is it possible for you to check with the management what is causing the delay.


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