Buy Stock Of Bharat Forge, Top Brokerage Upgrades Target Price After Dividend & Q2 Report

Bharat Forge is a leading supplier of various components for the aviation sector making us a renowned name amongst aerospace forging companies in India and around the world. The company has recently published its quarterly earnings report. Additionally, the company this week announced an interim dividend of Rs. 1.50 per equity share of the face value of Rs. 2 each (at the rate of 75%). November 25, 2022 which is the Record Date fixed for the purpose. Top brokerage firm Prabhudas Lilladher has given a buy rating to the stock.

Stock To Buy: Target Price

The Current Market Price (CMP) of Bharat Forge is around Rs. 859. Prabhudas Lilladher has estimated a Target Price for the stock at Rs. 950. This stock has the potential to give a 10.59% return, in the upcoming 12 months.

Stock Outlook
Current Market Price (CMP)	Rs. 859
Target Price	Rs. 950
Potential Upside	10.59%
52-week high share price	Rs. 896.70
52-week low share price	Rs. 595

Quarterly earnings

Bharat Forge Bharat Forge's (BHFC) 2QFY23 standalone EBITDA margin at 24.3% (-40bps QoQ) disappointed due to higher RM cost (~45bps impact) and one-off charges on defense business (Rs. 130mn). Lower share from the export business (57% vs 60% QoQ) despite higher USD realizations also impacted margins. Shipment tonnage at 61.1k MT grew 5.6% QoQ led by healthy CV demand in both India and export business. However, realization growth was flat QoQ at Rs. 304k as exports contribution reduced to 57% vs 60% last quarter.

Order book & defense revenue growth

Production schedules for Class-8 truck orders are booked for 2023. It has won orders for the export markets, passenger vehicles (18% of revenue, 7x growth since FY16) as well as industrial segments. BHFC's 100% subsidiary Kalyani Strategic Systems (KSSL) has won export order worth USD 155mn, which will be executed over next 36 months. Management expects 3x growth in defense revenue over the next few years, from Rs. 3-5bn currently. Additionally, the board highlighted that near-term CV demand looks positive in both India and export markets.

Stock Valuation

Maintaining a buy rating, Prabhudas Lilladher said, "We remain positive on the stock led by multiple growth levers in domestic & export automotive segment with cyclical turnaround in CV industry and easing of the chip shortage going ahead, strong double-digit growth in high margin non-auto business revenue contribution from defense & renewable segment and rising traction in E-mobility segment. Reiterate buy with a revised target price of Rs. 950 (Rs. 875 earlier) at 28x Sep-24E EPS."

Disclaimer

The above stock was picked from the brokerage report of Prabhudas Lilladher. 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.