Pabhudas Lilladher
Target: ₹439
CMP: ₹496.75
Bharat Forge’s Q2FY21 performance was weak, led by tonnage decline of nearly 24 per cent y-o-y to 40.8k (against expectation of 44.6k). The sharp decline in volumes was led by nearly 33 per cent/44 per cent y-o-y exports decline in industrial/auto segments (about 52 per cent of standalone revenues).
Pick-up in the domestic CV segment is visible, while the PV segment is anticipated to grow in the coming period. Outlook exports: Expect H2 to remain uncertain led by recovery in the auto segment; oil and gas will continue to remain weak. Class 8 truck demand remains stable; the US market is expected to stabilise as the Presidential election is over. We see growth potential in the wind energy business (₹50 crore revenues) with target to grow by 3-4x in the near term.
The company has won new businesses in the domestic PV segment with new players — most of them are expected to ramp up in FY23/24. The company has also gained some market share in the CV segment. Consol Capex guidance for FY21 at ₹450 crore. Expect no major capex in standalone in H2-FY21.
We believe that Bharat Forge is much better-placed than previous cycles with new products/customer additions both in auto andnon-auto segments. However, the same is well-captured in recent valuations expansions at 25x/20x FY22/23 consol EPS.
Hence, we continue to maintain Hold with a revised target price of ₹439 (earlier ₹446).
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.