'Accumulate' The Stock Of Bharat Forge, Company's Quarterly Revenue Up 35% YoY, Says Geojit

Brokerage firm Geojit suggests buying the stock of Bharat Forge Ltd. The demand for the automobile segment remains robust in both domestic and export markets. Revenue for the last quarter increased by 35% YoY on the back of a sharp recovery and a pass through of steel price inflation.

Stock To Buy: Target Price

The Current Market Price (CMP) of Bharat Forge is Rs. 741. Geojit has estimated a Target Price for the stock at Rs. 815. This stock has the potential to give a 10% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 36,672 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 741
Target Price	Rs. 815
Potential 1 year return	10.00%
52 week high share price	Rs. 847.95
52 week low share price	Rs. 595

Financial Results

On QoQ basis, CV & PV registered a growth of 5%/8% respectively. BFL's 2W- EV associate Tork Motors (49% stake) has received FAME-II approval and will start delivering its first EV-MC in April. It has also won orders for developing components for E- CVs in the LCV segment. Margin contracted by -636bps due to increase in input cost and lower utilization from the subsidiary. However, cost of Aluminium and Steel declined by 25% and 8% respectively, compared to its peak in April.

Stock Advantages: Geojit

Giving an 'accumulate' rating Geojit stated, "Amid the crisis, demand visibility looks robust on a medium to long term. On a consolidated basis, the valuation seems attractive compared to its historical average. We expect the order inflow to continue. We believe that domestic demand visibility looks attractive and expect the margin to show resilience owing to, growth coming from the defence and sustained recovery in the auto space. However, the rise in inflation globally and geopolitical tension is looming a cause of worry for the near term and led to lower 170bps in margin on estimates. We value BFL at 24x FY24E EPS."

New Business Growth

"We expect the incremental revenue from new business/products to grow at double digit in the next 2 years due to sustained and meaning macroeconomics revival, pick up in infra projects, and roadmap for EV. We expect meaning full recovery in overseas subsidiary in FY23 & factor a consolidated earning growth of 26%YoY CAGR over FY22-24E", informs Geojit.

Defence And Electric Vehicle Growth

Its strong demand in the Aerospace segment, contributing ~10% within the industrial segment is on track and the company is close to achieve its target in the export by FY23E. In addition, the company has added two new customers for the quarter in the aerospace, providing a solid visibility for long term growth. On the Defence & Aerospace, BFL has already set the target to reach Rs. 1000cr from domestic and Rs. 400cr from export, in revenue by year 2025-26 horizon.

Order inflow and acquisition

The 2W- EV associate Tork Motors has received FAME -II approvals. The company has also won orders for developing components for electric CV in the light truck segment and system electronics for Industrials. BFL has completed the acquisition of JS Autocast Pvt Limited, at an Enterprise Value of Rs. 490 cr. This acquisition significantly enhances the capabilities to address segments in the Industrial and energy sector in both domestic and export markets.

Company Portfolio:

Bharat Forge Ltd (BFL) is a leading player in the forging Industry. The company is serving in several sectors including automobile, power, oil and gas, rail and marine, aerospace & defence, construction, mining, etc. Market shift towards light weighting components for Electric vehicles, represents a considerable growth opportunity for BFL in coming years, both in terms of top-line & margin and E-Mobility components & system business. The company's International Automotive & Industrial segment grew by 6% and 30% YoY respectively, and domestic business posted strong double digit owing to lower base.

Disclaimer

The above stock was picked from the brokerage report of Geojit. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.