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, construction, mining, etc. Q1FY20 revenue de-grew by 4%YoY due to the slowdown in Industrial export (down by 37%YoY) & weakness in domestic CV by 31%YoY. EBITDA margin declined by 240bps due to inflationary pressure on steel price and lower product mix. BFL's new value-added order received on aluminum forging is on track...

During Q1FY20, BFLs sales declined by 9 percent YoY to Rs13.5bn (below our estimates of Rs14.9bn).

BHFC's Q1FY20 operating performance were weak with OPM at 26% (PLe: Change in Estimates | Target | Reco 30%), on the back of lower realizations (flat YoY/ -17% QoQ impacted by inferior product mix. While the management plans to neutralise the impact of...

Standalone revenue was down 9% YoY at INR13.5b (our estimate: INR17.1b) in 1QFY20 due to lower tonnage (-9% YoY/-3% QoQ to 60.9k ton). Realization declined 17% QoQ (flat YoY) to INR221.2k/ton (our estimate: ~INR267.5k) due to 2% price pass-through and de-growth in Oil & Gas/Defence. EBITDA declined 18% YoY to INR3.5b (our estimate: ~INR4.9b), with the margin contracting 290bp YoY/QoQ to 26.1% (our estimate: 28.8%). Adj. PAT declined 26% YoY to INR1.7b (our estimate: INR2.7b). Key highlights from earnings call: (a) Oil & Gas de-stocking impact is behind...

BHFC is the flagship company of Kalyani Group. It is one of the largest commercial forging companies in the world in terms of capacity and revenue.

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, construction, mining etc. Q4FY19 revenue grew by 14%YoY due to superior product mix. Despite weak auto outlook across India & Globally, International trucks & cars grew by strong 14% & 35% respectively due to order backlog. Both Export & Domestic revenue grew by 18%/6%YoY, largely led by 31%YoY contribution from industrial business, in which Defence, Agri...

Steady Business Outlook Maintain BUY: During FY19, Bharat Forge Ltd (BFL) reported 22.6% sales growth to Rs65.2bn and 27.5% PAT growth to Rs10.7bn. The company reported 9.9% volume growth during FY19.

Increasing kit value, newer products & verticals to support! BFL is an important player in the CV ancillary space, providing forging components to both domestic and global OEMs. The CV segment accounted for ~41% of BFL's total FY19 revenues. Acknowledging its reliance on the CV space, BFL has consciously attempted to (i) infuse a greater degree of diversification in its offerings and (ii) to augment kit value i.e. content per vehicle. The industrial segment (defence & aerospace, agri, infra, railway and oil & gas) constituted ~40% of FY19 revenues. It continues to perform well...

Exit poll results predict an easy win for the ruling BJP party. Poll of polls predicts NDA will win 315 seats out of 542 seats and UPA alliance is expected to win 111. As a result, domestic markets opened higher today with 10Y yield lower by 6bps, INR up by 1.1% and Sensex gaining over 2%. Notably, the error rate in final results and exit polls can be 15-20%. A clear majority, counting on 23 May) will ensure India's outperformance when global markets are facing significant headwinds in the form of subdued growth and US-China trade war....

Key highlights from earnings call: (a) In FY19, BHFC won new orders worth USD50m of this, 60-70% was from the non-CV segment. (b) US Class 8 volumes expected at 330k in CY19 (+5% YoY). (c) Sees headwinds in CVs (domestic), PVs (global) and Oil &Gas; (O&G;) in 1QFY20, but expect recovery from 2QFY20. (d) Capex for FY20 at INR4-5b (FY19 at ~INR8.6b); expect capex intensity to decline significantly post FY20. Valuation view: We have lowered our FY20/21 consol. EPS by ~10%/2% to factor in headwinds in key businesses. BHFC has delivered strong operating...