FAG Bearings Net Profit Spurts By 36% YoY

FAG posted a handsome growth of 20.47% in its total income to Rs 401 crore in Q1CY14 against Rs 333 crore in Q1CY13. The company's EBITDA boosted by 34.40% to Rs 56 crore in the said quarter against Rs 42 crore in Q1CY13. The considerable boost in its EBITDA was due to lower increase of 18.49% growth in its total expenses on yearly basis. On the other hand, FAG posted a 36.27% surge in its net profit during Q1CY14 and posted a net profit of Rs 35 crore during the period under review against Rs 26 crore in Q1CY13.

On profitability front, FAG showed an expansion of 144 basis points in its EBITDA margins to 13.90% during Q1CY14 against 12.46% in the same period last year. The company's net margins showed an expansion of 100 basis points to 8.65% during Q1CY14 against 7.65% in Q1CY13. The lower net margin expansion than that in EBITDA margin was predominantly due to 25.39% growth in its depreciation expenses. The considerable increase in depreciation clearly indicates that FAG has doing significant amount of capital expenditure. Interestingly, the expansion was funded by internal accruals which can be seen from lower interest charges on yearly basis.

FAG posted a flat revenue growth of 1.74% during the quarter under review compared to previous quarter i.e. Q4FY13. The company posted a marginal decline of 0.21 % in its net profit on sequential basis. The flat results clearly shows that the company is still facing problems in incremental growth on sequential basis despite of a handsome growth on yearly basis. Hence investors should watch this stock closely before investing in, as FAG or overall industry is expected to show sideways performance for next few quarters.