SKF India : Bad Results, Hidden Opportunity?

Results are coming in, and as expected, they are not brilliant.

SKF India, the bearings major posted lackluster results, with net profit dropping from 37.7 crores to 14.5 crores (QoQ Unaudited). With the auto industry in a slow down, the auto ancillaries are also slowing down. SKF has a lot of clients in the auto industry, and slow down is jutting out in the form of lower sales that went down from 394 crores to 317.5 crores (March Q0Q unaudited).

As far as the yearly results are concerned,

• Net Sales for the year 2008 rose to Rs. 16202 Million showing increase of 3.3% over the corresponding period of previous year.

• The Profit after Tax for the year 2008 amounted to Rs. 1277 Million as compared to Rs 1607 million in the corresponding period of last year.

• Earnings per share at the end of the year is 24.2 as compared to 30.5 in corresponding period of last year

The MD said this:

"In today's challenging environment we have taken measures to remain financially robust, focusing on efficiency and finding innovative ways to remain lean in order to keep our cost down. Our focus is on value added services and being recognized by our customers as a 'solutions provider'. We believe that the economic situation will remain uncertain for some time and our focus is clearly on creating close customer partnerships to offset some of these adverse conditions."

For SKF, the year was marked by high volatility in input costs, interest and currency exchange rates and in customer demand, more particularly during the latter part of the year leading to pressure on margins and working capital. Demand from the Automotive Sector, particularly commercial vehicles continued to remain weak.

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So what would i, as an investor think? How would i look at this? I would look at this as an opportunity. When companies perform well, everyone is buying the stock. But during the rough weather, very less buy. And these people profit from their decisions later, when the company starts performing better when the market conditions improve. My recommendation is to wait till the price falls to around Rs. 120 level, and then enter slowly. If you think the price is not going to fall, and you are one of the long term investors (and you happen to read this!), you can enter cautiously now, since a fall is anticipated anytime.