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Motilal Oswal
Bharat Forge (Buy)
Target: ₹850
CMP: ₹749.50
Strong performance by Bharat Forge in Q4-FY21 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. It is in the process of acquiring 70 hectares of land, with an investment of up to ₹240 crore over three years. This facility will provide it flexibility to house all new initiatives, including Defense and e-Mobility.
Capex for FY22/FY23 will be approximately at ₹300 crore/₹250 crore.
All businesses are witnessing a sharp cyclical recovery. This, coupled with its focus on creating new revenue pools in defense and e-Mobility, can further lead to de-risking of the business. We estimate consolidated revenue/EBITDA/PAT to grow at a 31 per cent/68 per cent/302 per cent CAGR (FY21-23).
We raise our consolidated EPS by 17 per cent/18 per cent for FY22/FY23, driven by revenue upgrades due to a strong cyclical recovery. The stock trades at 40.4x/24.6x FY22E/FY23 consolidated EPS. We maintain our Buy rating with a target price of ₹850/share.
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