Timken India vs SKF India: The Indian bearings market is dominated by two companies: Timken and SKF. And guess what? Both companies are Indian subsidiaries of foreign players.
Timken has replaced SKF as the largest company in the sector while rewarding its shareholders with an impressive 340% return in the past five years.
So, going forward, which one is better of the two? Or what should investors of each company expect in the future? We’ll attempt to answer these and other questions in our comparative analysis of Timken India vs SKF India.
Timken India Vs SKF India
We’ll begin our comparative study by getting ourselves acquainted with an industry overview of the two companies. Next, we’ll read about their businesses separately. Next, we’ll quickly run through the financials of both stocks. A highlight of the future plans and a summary conclude the article at the end.
Industry Overview
The bearings sector worldwide was valued at $ 60 billion in FY21 with India accounting for a small 3% of the total market. The sector globally is expected to grow at a CAGR of 9.1% between the 2014 and 2025 period owing to its critical presence in all types of equipment.
Talking about the domestic market, its value was pegged at $ 1.8 billion in FY21 and is projected to expand at an annualised rate of 10.9% to $ 3.4 billion by FY27.
The automobile industry and the industrial sector are major consumers of bearings across the world. As the effects of the Covid-19 pandemic subsided, the automotive and industrial sectors registered growth in the double digits in the past two financial years. Furthermore, market experts remain optimistic about the near-term prospects.
Furthermore, the ‘Atmanirbhar Bharat’ initiative launched by the honourable PM Narendra Modi has laid the foundation for the boom of the domestic bearings industry.
The government’s push has allowed domestic manufacturers to ramp up their capabilities and capacities to fulfil demand from Indian OEMs and industrial players. This is gradually aiding the industry to decrease its reliance on imports.
Company Overview
In the section above we briefly read about the sector in which the companies operate. Now, we’ll learn about the similarities and differences between their businesses for our Timken India vs SKF India study.
Timken India
Timken India Ltd. (TIL) is the Indian subsidiary of Timken Company, an American multinational corporation engaged in the manufacturing of bearings and power transmission products. The promoter presently holds a majority 67.8% stake in the business.
The domestic entity was set up as a joint venture between Tata Iron and Steel Company (TISCO) and Timken Co. in 1987. Later in 1999, the US parent acquired Tata’s stake in the company and became the only promoter.
Fast forward to the present day, TIL is a leading bearings (tapered roller, cylindrical roller, spherical roller and slewing) producer and seller in the country with two state-of-the-art manufacturing facilities at Jamshedpur and Bharuch.
In addition to this, it is also involved in the business of bearing repairs and allied mechanical power transmission services.
It was a well-spread distribution network with 6 warehouses and sales offices in key Indian cities: Kolkata, Delhi, Bangalore, Pune, Jamshedpur and Chennai.
SKF India
SKF India is the Indian subsidiary of AB SKF, a Swedish multinational corporation engaged in the manufacturing of bearings and industrial seals. It entered India in 1923 and has grown from a ball bearings maker to a leading automobile and industrial solutions provider with multiple product categories.
As of the present date, SKF India offers a broad range of products and services including bearings and units, mechatronics, lubrication solutions and services. The company has a diversified manufacturing footprint with 3 plants.
In addition, it has 12 offices and a large distribution network of 680 distributors powered by a workforce of 1,600+ employees.
Timken India Vs SKF India – Financials
Timken India vs SKF India – Revenue Growth
The operating revenues of Timken grew faster than SKF in the last five financial years at 11% against its Swedish counterpart of 7.2%. The higher growth rate can be attributed to a lower base effect for the US subsidiary.
The table below showcases the operating revenue growth of Timken India and SKF India for the last five financial years.
| Fiscal Year | Timken India | SKF India |
| 2023 | 2,807 | 4,305 |
| 2022 | 2,203 | 3,666 |
| 2021 | 1,411 | 2,671 |
| 2020 | 1,618 | 2,842 |
| 2019 | 1,664 | 3,035 |
| 5-Yr CAGR | 11.02% | 7.24% |
Timken India Vs SKF India – Net Profit Growth
Talking about the net profit growth, it was also higher for Timken India at 21.3% against SKF’s 9.4% because of a lower base. The profit after tax of Timken India and SKF India stood at Rs 391 crore and Rs 525 crore in FY23 respectively.
The figures below highlight the net profit growth of Timken India and SKF India for the last few fiscal years.
| Fiscal Year | Timken India | SKF India |
| 2023 | 391 | 525 |
| 2022 | 327 | 395 |
| 2021 | 143 | 298 |
| 2020 | 246 | 289 |
| 2019 | 149 | 336 |
| 5-Yr CAGR | 21.33% | 9.35% |
But why does Timken’s growth seem to be much more than its counterpart? Let us take this up in the next section of profit margins of our Timken India vs SKF India analysis.
Timken India Vs SKF India – Profit Margins
The operating margin for Timken India was low at 13.6% in FY19 supporting our argument of low base. Overall, the margin declined for the company in the recent fiscal while that of SKF improved. The reason behind this can be differences in the product cost and pricing mix for both companies.
The figures below compare the operating profit margins of Timken India and SKF India over the last five fiscals.
| Fiscal Year | Timken India | SKF India |
| 2023 | 18.8 | 17.1 |
| 2022 | 20.0 | 14.5 |
| 2021 | 13.9 | 14.9 |
| 2020 | 19.1 | 13.9 |
| 2019 | 13.6 | 17.5 |
The difference in the operating margins of the two players translates into PAT margins with the US subsidiary running at higher figures.
The table below highlights the net profit margins of Timken India and SKF India for the last few financial years.
| Fiscal Year | Timken India | SKF India |
| 2023 | 13.9 | 12.2 |
| 2022 | 14.8 | 10.8 |
| 2021 | 10.2 | 11.1 |
| 2020 | 15.2 | 10.2 |
| 2019 | 8.9 | 11.1 |
We see that Timken boasts higher margins than SKF. Does it make it more profitable than SKF? Let us analyse the profitability of both the companies of our Timken India vs SKF India comparative study in the next section.
Timken India Vs SKF India – Return on Equity / Net Worth
The return on equity (RoE)/ net worth (RoNW) of Timken India and SKF India stood at 19% and 22% in FY23 respectively. The higher return of Swedish business with marginally lower margins signals a higher asset turnover meaning the company sells products in high volume although earning lesser margins.
The values below represent the return on equity (RoE) / net worth (RoNW) of the two companies for the past five fiscals.
| Fiscal Year | Timken India | SKF India |
| 2023 | 19 | 22 |
| 2022 | 20 | 23 |
| 2021 | 11 | 17 |
| 2020 | 16 | 16 |
| 2019 | 11 | 19 |
We have not computed the return on capital employed as both companies are debt free. Let us read more about this in the next section.
Timken India Vs SKF India – Debt Analysis
We’ll keep our debt analysis of Timken and SKF brief as both are debt-free stocks. Furthermore, the nominal annual interest charges make their interest coverage ratios look ballooned at 218 times (Timken India) and 531 times (SKF India).
Timken India Vs SKF India – Future Plans
So far we looked at the previous fiscals’ data for our comparative analysis of Timken India vs SKF India. Let us learn about their future plans in this section and try to understand what lies ahead for the companies and their investors.
Timken India Future Plans
- The company is setting up a manufacturing facility at a cost of Rs 600 crore in Bharuch, Gujarat for the production of spherical and cylindrical roller bearings. It used to import these products from the parent earlier. The production is anticipated to commence by 2025 and drive sales growth business.
- Timken recently acquired GGB Bearings, a leading metal-polymer bearings maker to expand its product offerings.
- In addition to this, the management is bullish on opportunities arising from electrification in Indian Railways and is expanding its portfolio along the same lines.
SKF India Future Plans
- The management of SKF is planning to spend Rs 150 crore in FY23 towards capital expenditure, higher than Rs 91 crore allocated in the FY22 period.
- Furthermore, the company is likewise optimistic about the high growth gaps emerging in the railway industry and EV industry.
Timken India Vs SKF India – Key Metrics
We are almost at the end of our comparative study of Timken India vs SKF India. Let us take a look at some key metrics of the stock other than the ones covered above.
| Particulars | Timken India | SKF India |
| CMP | ₹3,134 | ₹4,448 |
| Market Cap (Cr.) | ₹23,575 | ₹21,500 |
| EPS | ₹52 | ₹106 |
| Stock P/E | 60.3 | 41 |
| RoE | 19% | 22% |
| Book Value | ₹271 | ₹474 |
| Price to Book Value | 11.6 | 9.19 |
| Promoter Holding | 67.8% | 52.6% |
Conclusion
Going forward, Timken India looks to be better positioned than its counterpart because of its larger CAPEX plans and higher margins. The lower RoE of the US subsidiary might be on account of capacity expansion plans in play. In the quarters ahead, investors should closely track earnings growth and the margins delivery of both companies. Further, any CAPEX announcements can also help to drive stock value.
Do you think SKF has any plans up its sleeves like Timken? Or is it a slow-moving company against its competitor? How about you enlighten us with your views in the comments below?
By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks also get updated with stock market news, and make well-informed investment decisions.
The post Timken India Vs SKF India – Financials, Future Plans & More appeared first on Trade Brains.
Viahttps://ift.tt/KYDNETS
