SKF vs FAG: Bearings biggies face off (Part III) - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

SKF vs FAG: Bearings biggies face off (Part III)

Apr 18, 2011

In the previous article, we discussed the topline trend of the two largest bearing manufacturers viz. SKF India and FAG Bearings. We will now focus on how their profitability has been over the past few years.

Let us consider operating performance first. As shown in the chart below, FAG's operating margins have remained consistently higher than that of SKF's over the past five years. Both the companies suffered a margin hit in 2009 but even then, FAG's margins came in higher than its counterpart. But the picture reverses if one considers the CAGR (compounded average annual growth rate) in operating profit. Between CY05 and CY10, SKF's operating profits have grown at a CAGR of 22%, slightly higher than FAG's 18%. This is because SKF has been able to keep its margins intact for both the years under consideration. FAG, on the other hand, has witnessed a slight contraction for the same time period.

Both the players are also different in the way the operating margins are composed. For SKF, margin of traded goods is on the higher side than that of bearings manufactured in house (margins of traded goods take into account only purchase and sale of traded goods). But in the case of FAG, margins for in house products have been higher for most of the years under consideration. This perhaps points towards the fact that while SKF imports most of the high value add products; FAG manufactures some of it in house.

Source: Equitymaster

Let us now move on to net profit margins. While FAG had an edge over SKF on the operating margin front, the differential narrows down a bit by the time the net profit figures are reached. This could be attributed to slightly lower depreciation charges of SKF and absence of any extraordinary losses. However, on account of better performance at the operating level, FAG still noses ahead of SKF with an average net profit margin of around 12% between CY06 and CY10. The same for SKF came in the region of 8%. CAGR wise, SKF's profit growth at 22% between CY05 and CY10 comes in slightly better than FAG's 20% during the same period.

To conclude, yet again, there was very little to choose between the two on the profitability parameters as only a few percentage points separated them.

It will be interesting to see what will be the result like when we compare the capital efficiency of SKF and FAG in our next article in the series.

SKF vs FAG Bearings biggies face off Article Series - Previous article | Next | All Articles

Equitymaster requests your view! Post a comment on "SKF vs FAG: Bearings biggies face off (Part III)". Click here!

  

More Views on News

SCHAEFFLER INDIA Announces Quarterly Results (1QFY22); Net Profit Up 401.7% (Quarterly Result Update)

Jul 22, 2021 | Updated on Jul 22, 2021

For the quarter ended June 2021, SCHAEFFLER INDIA has posted a net profit of Rs 1 bn (up 401.7% YoY). Sales on the other hand came in at Rs 12 bn (up 180.9% YoY). Read on for a complete analysis of SCHAEFFLER INDIA 's quarterly results.

MAHINDRA CIE AUTO. Announces Quarterly Results (1QFY22); Net Profit Up 205.8% (Quarterly Result Update)

Jul 22, 2021 | Updated on Jul 22, 2021

For the quarter ended June 2021, MAHINDRA CIE AUTO. has posted a net profit of Rs 1 bn (up 205.8% YoY). Sales on the other hand came in at Rs 20 bn (up 177.7% YoY). Read on for a complete analysis of MAHINDRA CIE AUTO.'s quarterly results.

5 Indian EV Battery Makers to Watch Out for (Views On News)

Jul 6, 2021

These companies are racing at warp-speed to make India the hub of EV battery manufacturing.

Auto Components Maker Rolex Rings to Hit the Market on 28 July. Price Band Fixed at Rs 880-900 (Views On News)

Jul 26, 2021

Rolex Rings grey market premium is at around Rs 530 from its issue price of Rs 880-900.

Sona Comstar IPO: Should You Apply? (Views On News)

Jun 14, 2021

All you need to know about Sona Comstar IPO.

More Views on News

Most Popular

These Are the Best Stocks to Own (Fast Profits Daily)

Jul 22, 2021

Find out what I think are the best kind on stocks to own in the market.

Cash the Crash in Gas Prices (Fast Profits Daily)

Jul 21, 2021

Get ready to profit from the coming crash in the price of natural gas.

Electric 2-Wheelers: The Megatrend has Begun (Profit Hunter)

Jul 20, 2021

The shift to electric 2-wheelers will be faster than expected.

A Trading Hack to Multiply Profits (Fast Profits Daily)

Jul 23, 2021

Use this trading hack and get a big boost in your trading profits.

OPEC & Our Next Crude Oil Trade (Fast Profits Daily)

Jul 20, 2021

This is why we are on the correct side of the crude oil trade.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2021
Get our special report Multibagger Stocks Guide (2021 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

COMPARE COMPANY

MARKET STATS