NRB Bearings capex and aerospace diversification strengthen medium-term growth outlook

Investment View and Valuation

ICICI Direct Research maintains a BUY recommendation on NRB Bearings with a revised target price of Rs 610, based on 30 times FY28E EPS. The broker highlights healthy Q1 FY27 execution, capacity expansion, a growing nominated-business order book and diversification into industrial, aerospace and defence applications as key supports for the medium-term outlook.

Q1 FY27 Financial Performance

NRB Bearings reported consolidated Q1 FY27 revenue of Rs 370 crore, up 19.2 per cent year on year from Rs 310 crore, supported by stronger execution. EBITDA increased 24.0 per cent year on year to Rs 63.7 crore, with EBITDA margin expanding 64 basis points to 17.2 per cent. PAT rose 14.8 per cent year on year to Rs 36.8 crore, although PAT margin declined 31 basis points to 10.0 per cent.

Business Profile and Diversification

NRB Bearings is described as India's largest producer of needle and conventional cylindrical roller bearings, with a significant presence in Indian automotive markets. Domestic markets account for around 70 per cent of revenue, while exports contribute around 30 per cent. The company exports to about 45 countries and its domestic automotive exposure includes two-wheelers, passenger vehicles and commercial vehicles.

The industrial business grew 34 per cent in Q1 FY27 and increased its contribution to revenue to 14 per cent from 11 per cent earlier, indicating rising traction in non-automotive applications. Management indicated that around 70 per cent of the business is linked to applications common across ICE, hybrid and EV platforms, making NRB Bearings largely EV-agnostic.

Capacity Expansion and Order-Book Visibility

The broker sees capacity expansion and a larger nominated-business order book as key sources of medium-term visibility. NRB Bearings has planned capex of around Rs 270 crore, of which Rs 60 crore has been invested and another Rs 100 crore has been ordered or is in the ordering process. Management indicated that Rs 100 crore of capex can support around Rs 130 crore of sales.

Lifetime nominated business has increased to Rs 1,100 crore from Rs 800 crore. Management is also expanding the addressable market through aerospace, defence, industrial bearings, automotive adjacencies, electrification, robotics, mobility and heavy equipment.

Aerospace and Defence Opportunities

Following the Mahant Tool Room acquisition, the aerospace and defence business has an order book of around Rs 30 crore. Total defence orders, including NRB Bearings' existing business, are around Rs 50 crore. The company recently secured a Sukhoi-30 spherical-bearing order, an application management said is served by fewer than five global players.

Management targets revenue of Rs 300 crore and operating profitability of Rs 90 crore from aerospace, defence and commercial aerospace by 2031.

Unitech Industrial Joint Venture

The Unitech industrial joint-venture plant has been relocated from Hyderabad to Aurangabad, where NRB Bearings acquired a partially ready facility to shorten commissioning time. The plant is targeted to be commissioned by April 2027, with investment of Rs 110 crore and capacity for around Rs 130 crore of sales. It will produce industrial cylindrical roller bearings for large industrial gearboxes and other heavy-duty applications.

Management Outlook

Management remains conservative on formal guidance but noted that its trailing 12-month growth rate of around 14.3 per cent implies revenue of around Rs 2,730 crore by FY31, compared with an earlier Rs 2,500 crore aspiration. Its aspirational FY31 revenue vision is closer to Rs 3,000 crore as new verticals and nominations scale.

Management reiterated an expected annual EBITDA-margin trajectory of 18-20 per cent, while cautioning that quarterly margins can fluctuate due to cost escalation and timing differences.

ICICI Direct Research Estimates

ICICI Direct Research forecasts revenue CAGR of 13.0 per cent and PAT CAGR of 13.3 per cent over FY26-FY28E. The broker's estimates are as follows:

Key Risks

• A slowdown in the domestic automotive and industrial segments.
• Higher commodity prices.