Schaeffler India Ltd – Strong Group
Schaeffler India Ltd. (SIL), erstwhile FAG Bearings, with four plants and 11 sales offices, has a significant presence in India with three widely known product brands – FAG, INA, and LuK. SIL produces a wide range of ball bearings, cylindrical roller bearings, spherical roller bearings, and wheel bearings sold under the brand name FAG. The company manufactures engine and transmission components for front accessory drive systems, chain drive systems, valve trains, shift systems, and a range of needle roller bearings and elements under the brand, INA. SIL also produces clutch systems and dual mass flywheels for passenger cars, LCVs, heavy commercial vehicles, and tractors, which are sold under the brand LuK. In addition to this, SIL has dedicated engineering and R&D support based in India to augment its product teams.
Valuation:
We expect SIL to benefit from industrial and automobile aftermarkets, strong growth traction in railways and export segments, and better prospects for the bearings business amid stricter norms. We are positive in the automobile sector and expect the industry to post double-digit growth in FY2023. Hence, we recommend a BUY rating in the stock with a target price (TP) of Rs.3960, 55x CY23E EPS.
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