Bharat Forge Ltd. share price target

Bharat Forge Ltd (BFL) is a leading player in the forgings industry. The company is serving several sectors including automobile, power, oil and gas, rail & marine, aerospace & defence, construction, mining, etc. Q1FY22 revenue came at Rs.2108cr.(+1.2%QoQ). This was largely on...

Bharat Forge Ltd (BFL) is a leading player in the forgings industry. The company is serving several sectors including automobile, power, oil and gas, rail & marine, aerospace & defence, construction, mining, etc. Q4FY21 has witnessed a standalone revenue growth of 26.2%QoQ on the back of 43% growth in exports (US truck sales and Oil & Gas) and 9.6% growth in domestic revenues. Despite cost inflationary pressure, margin expanded by 680bps from Q3FY21, owing to superior product mix and cost control initiatives....

BHFC's 4QFY21 result beat estimates on all fronts as Revenue/EBITDA/Adj. PAT came higher by 10%/23%/43% over PLe. This was led by i) 39% YoY growth in tonnage (due to strong traction in auto demand for both domestic/exports), ii) 7% YoY growth in realizations (better mix and RM inflation price through) and iii) cost control. Outlook for auto segment...

BFL said: (i) cost pressure exists on raw material and freight costs (up 3-4x in the recent past), (ii) BFL has recently won an order from Government of India in the defence domain (non-automotive) wherein BFL will start supplying components in a month's timeframe (quantum not disclosed); (iii) BFL will be acquiring land to the tune of ~70 hectares at Khed (Maharashtra, near Pune) at an outlay of ~| 240 crore (over the next two to three years) wherein they intend to construct two new plants in the domain of e-mobility and defence. (iv) BFL will be targeting an RoCE of ~20%; (v) US-class 8 truck...

Greenfield capex with focus on the Defense and e-Mobility space Strong performance by BHFC in 4QFY21 was driven by a strong recovery in the Auto export business and resultant benefits of operating leverage. While all core businesses are expected to witness a sharp cyclical recovery, BHFC's huge plans in Defense and e-Mobility is starting to fructify with the setting up of a greenfield plant focusing on these areas. We raise our consolidated EPS by 17%/18% for FY22E/FY23E, driven by...

BHFC's 3QFY21 performance was weak as realizations declined to 3- year low by ~11% YoY to Rs2.03L/ton (PLe Rs2.33L/ton). This was led by weak sales in oil & gas segment (sales at USD3m v/s normalized rate of USD25-30m) and higher PV share. Tonnage growth of 8% was led by strong traction in auto demand in both India and exports. While pickup is visible in class 8 trucks for...

Bharat Forge (BFL) reported a steady Q3FY21 performance. Standalone revenues came in at | 1,036 crore (down 3.8% YoY) despite 8.4% YoY tonnage growth to 50,943 MT. Total India revenues were at | 516 crore (up 26.5% YoY; CV up 49.4%, PV up 27.5%, industrial up 16%). Export revenues, on the other hand, were down 19.5% YoY to | 512 crore (CV up 7.1%, PV down 8.4%, industrials down 60.1%). Standalone EBITDA for the quarter was at | 215 crore, with consequent margins at 20.7%. Margin performance was positively impacted by operating leverage, with gross...

With the bulk of target customer segments viz. domestic CV, global CV space (improved new order readings of Class 8 trucks with November 2020 print coming in at ~53,000 units (~3x YoY, up ~30% MoM)), bottoming out, we expect a rapid recovery at Bharat Forge, a large part of which is captured by its prevailing valuation multiples (trading at ~32x P/E on FY23E numbers). We will keenly monitor any surprise on the operating margin front consequent to a lot of cost cutting initiatives undertaken by the company, before any meaningful upgrade. We also await outcome on scrappage...

Domestic auto industry volumes have been on a steady mend in the months post lifting of lockdown restrictions. Manufacturing and distribution activities have been getting ramped up gradually since June 2020, in step with the rest of the economy. However, the impact of the pandemic on the supply chain continues to inhibit a complete return to production normalcy. Nevertheless, most automotive industry segments have reported successive improvement in offtake throughout June-November 2020 (Exhibit 1) on the back of (i) initial bounce provided by pent-up aspect,...

Consol capex guidance at Rs4.5bn for FY21. Expect no major capex in 2H. to 40.8k (PLe 44.6k). The sharp decline in volumes was led by ~33%/44% YoY there has been some initial pickup in class 8 trucks (~19% of S/A revenues) along with ramp-up in PVs, the outlook for industrial remain weak with no...