SKFINDIA - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:16 pm

Fundamental Rating: 4.0

📊 Financials: SKF India has reported quarterly PAT of ₹41.3 Cr vs ₹46.7 Cr previously, showing slight earnings moderation (-2.04%). EPS at ₹109 is strong relative to price. ROE at 21.4% and ROCE at 28.8% reflect excellent capital efficiency. Debt-to-equity ratio of 0.00 highlights a debt-free balance sheet, ensuring financial stability. Dividend yield of 0.80% provides modest income support.

💹 Valuation: Current P/E of 21.5 is significantly below industry PE of 49.9, suggesting undervaluation. Book value ₹558 vs CMP ₹1,740 implies a fair P/B multiple (~3.1x). PEG ratio of 1.69 highlights valuation aligned with earnings growth. Intrinsic value appears higher than CMP, offering margin of safety.

🏭 Business Model: SKF India operates in industrial bearings, seals, and lubrication systems, serving automotive and manufacturing sectors. Competitive advantage lies in global brand strength, technological expertise, and diversified industrial demand. Risks include cyclical demand, margin pressures, and competition from domestic and global players.

📈 Entry Zone: Technically, support lies near ₹1,650–₹1,700. CMP at ₹1,740 is below DMA 50 (₹1,986) and DMA 200 (₹2,098), indicating weakness. RSI at 21.7 suggests oversold territory, making current levels attractive for accumulation.

📌 Long-term Holding: Strong fundamentals, debt-free balance sheet, and undervaluation make SKF India attractive for long-term holding. Accumulation on dips near ₹1,650–₹1,700 is recommended for compounding potential.

Positive

• 📊 Strong EPS of ₹109 supports earnings visibility.
• 🏭 Healthy ROE (21.4%) and ROCE (28.8%) reflect excellent capital efficiency.
• 💡 Debt-free balance sheet ensures financial stability.
• 📉 RSI at 21.7 indicates oversold territory, potential for technical rebound.

Limitation

• ⚠️ Quarterly PAT decline (-2.04%) signals earnings moderation.
• 📉 CMP below DMA 50 and DMA 200 indicates technical weakness.
• 💸 Dividend yield (0.80%) is modest compared to peers.

Company Negative News

• 📉 Decline in FII holdings (-0.57%) indicates reduced foreign investor confidence.

Company Positive News

• 📈 Increase in DII holdings (+0.40%) shows domestic institutional support.

Industry

• 🏭 Industrial bearings and engineering sector trades at industry PE of 49.9, highlighting SKF India’s undervaluation.
• 📊 Industry growth supported by automotive demand, manufacturing expansion, and infrastructure development.

Conclusion

⚖️ SKF India is fundamentally strong, undervalued, and debt-free with excellent return ratios. Entry is advisable near ₹1,650–₹1,700 support zones. Long-term holding is justified, with potential for compounding as industrial demand strengthens.

Would you like me to extend this with a peer benchmarking overlay against engineering peers like Schaeffler India and Timken India to highlight comparative valuation and efficiency?