Brokerage firm, Emkay Global has placed a "buy" call on the stock of auto ancillary company, Bharat Forge for an upside target of nearly 18% in 1-year.
Robust outlook across segments
"We did an analysis of CY21/22 demand outlook provided by 21 entities, including CV/PV OEMs, non-auto companies and industry associations. The read-through is positive for forging companies. The HCV segment is expected to grow strongly by up to 16% in CY22 in the North America and Europe regions. The CY21 outlook has been moderated due to supply constraints, leading to expectations of robust growth in CY22. In addition, strong growth is expected in India in CY22," the brokerage has said.
According to it, the global passenger vehicle segment is likely to clock double-digit growth in CY22 across regions, owing to the pending order book, improving macros and low channel inventory.
Bharat Forge: Leadership position in automotive segment
According to Emkay Global, Bharat Forge's revenue CAGR is expected at 19% in FY22-24E, led by the cyclical recovery in the underlying Auto and Industrial segments in both domestic and overseas markets. Moreover, nascent segments, such as Defense, Aerospace, Railways, Power electronics and Aluminum components, have the potential to cross US$100mn each in revenues in the medium term.
"Our positive view on BHC is underpinned by its leadership position in automotive forgings, focus on diversification, and an expected recovery in the core segments. We have a Buy rating on the stock with a Dec'22 target price of Rs 950, based on 27x P/E for the standalone business on Dec'23E EPS," the brokerage has said.
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