SKF India tanks 7%, hits over six-month low on muted Q2FY25 results

Shares of SKF India hit over six-month low of Rs 4,553, as they slipped 7 per cent on the BSE in Thursday’s intra-day trade after reporting a muted earnings growth for the second quarter ended September 2024 (Q2FY25). The stock of abrasives & bearings company is trading at its lowest level since April 29, 2024. It had hit a 52-week low of Rs 4,025 on March 13, 2024. The stock corrected 38 per cent from its 52-week high level of Rs 7,349 touched on June 18.  In Q2FY25, the company's profit after tax (PAT) grew 4.6 per cent year-on-year (Y-o-Y) at Rs 94.3 crore. However, on sequential basis, PAT was down 40.7 per cent. Revenue increased by 10.6 per cent Y-o-Y (3.2 per cent QoQ) to Rs 1,244.2 crore.

 

The company’s earnings before interest, tax, depreciation, and amortisation (EBITDA) margin contracted by 84 basis points (bps) Y-o-Y (dowb 610 bps Q-o-Q) to 10 per cent, led by higher trade sales and increase in others cost. 

 

Analysts at ICICI Securities said that SKF’s profitability remained muted during the quarter on account of contraction in margins due to higher trade sales and increase in others cost. They said that the revenue growth of 11 per cent is possibly driven by better growth in industrial segments like railways, heavy industries and metals (industrial segment is 51 per cent of total revenue). 

 

Going ahead, the brokerage firm expects that company’s operational performance to improve over FY25-26E, led by strong demand traction from higher growth segments like railways, renewables, industrials, automobile (2W & PV) and gradual recovery in exports. Moreover, company targets to increase localisation in the industrial segments to 60 per cent over the next few years (from 40-45 per cent at present), which will help the company in securing more orders and margin improvement.

 

SKF India offers a range of products designed to support the electrification of passenger transport. The company focusses on offering a rotational equipment solution across its automotive and industrial segments. It offers a wide range of products and services, including bearings, seals, lubrication systems, mechatronics, and services such as technical support, maintenance, and condition monitoring. 

 

SKF India in its FY24 annual report said the government initiatives like ‘Make in India,’ ‘Aatmanirbhar Bharat,’ and the ‘National Infrastructure Pipeline’ are set to bolster the demand for ball bearings. India’s rapid industrialisation and its growing emphasis on renewable energy are expected to drive the need for bearings.

 

Additionally, the country’s manufacturing sector is attracting significant foreign investments, with the potential to reach $1 trillion by 2025. Despite these opportunities, the organised ball bearings market faces a notable challenge from counterfeit products, which are easily accessible at lower prices, SKF India said.

 

As India continues to advance its manufacturing sector and emphasises technology and innovation, the demand for precision ball bearings is projected to rise. Additionally, the trend towards automation in the automotive and electronics industry is expected to further drive the demand for precision ball bearings in the Indian market, the company said.