Stock To Buy: Revenue Grew 28% Y-O-Y, Growth Remains Positive, Emkay Research Says Buy For 22% Upside

Emkay Global in its recent report has recommended buying stocks of Bharat Forge, an Auto & Auto Ancillaries company with a market cap of Rs 32.151 crore. According to the brokerage, the company has shown results above estimates and the growth also remains positive.

Company's performance, Current Market Price, 52 Week low/high

As of May 19, 2022, the shares of the Bharat Forge opened at Rs 680, and are currently trading at Rs 656.65, after declining 3.85%. In the last one year, the stock price of the company has witnessed a continuous change in price. The stock price has touched the 52 week low on 08 March 2022, and 52 weeks high on 10 November 2021. The brokerage has given a buy call for a target price of Rs 810 for 12 months of the target period.

CMP	Rs 656
52 Week Low	Rs 595
52 Week High	.Rs 847.95

Bharat Forge's Q4 EBITDA grew 29% YoY to Rs 4.3bn and came in 15% above our estimate, driven by better scale. Revenue grew by 28% YoY to Rs16.7bn, 12% above estimates on higher sales in the domestic industrials and overseas auto segments.

The brokerage has said, "We reduce our FY23E/24E EPS by 4%/3% to Rs25.6/Rs31.9, factoring in input cost pressures. Following the revision, we build in robust FY22-24E revenue/earnings CAGRs of 15%/21%, led by the cyclical recovery in the underlying auto and industrial segments in both domestic and overseas markets. Margins are likely to improve to 28.1% in FY24E from 26.9% in FY22. Our positive view on BHFC is underpinned by its leadership position in automotive forgings, focus on diversification, and the continuation of cyclical upturn in the core segments. Medium-term performance should be supported by new segments such as Défense, Railways, aerospace, E-mobility, and Light-weighting solutions. Retain Buy with a TP of Rs810, based on 24x P/E for the standalone business on Jun'24E EPS (25x Mar'24E earlier). Our target P/E multiple has reduced due to an increase in the cost of equity and a reduction in margin assumptions over the medium term in our DCF model."

 

EBITA Above Estimates, Revenue grow 28% YoY

In the report, the brokerage has said, "Revenue grew by 28% YoY to Rs16.7bn (est.: Rs15bn), above estimates due to higher sales in the domestic industrials and overseas auto segments. Tonnage grew by 3% and realization grew by 24%. EBITDA grew by 29% to Rs4.3bn (est.: Rs3.7bn), above estimates, owing to operating leverage benefits. EBITDA margin expanded by 20bps to 25.7%. Accordingly, adjusted PAT grew 46% to Rs2.6bn (est.: Rs2.2bn), above estimates, mainly led by higher operating profits. Overseas subsidiaries' adj. PBT profit stood at Rs147mn vs. Rs309mn last year. The profitability was impacted by cost pressures and the recent commencement of the US aluminium facility. Net debt (standalone) stood at Rs14.2bn as of Mar'22 vs. Rs16.3bn as of Dec'21."

Valuation, key risks buy the Emkay Research

The brokerage commenting on the performance and target price, said, "Maintain Buy with a TP of Rs 810, based on 24x P/E for the standalone business on Jun'24E EPS. Net debt-to-equity is expected to improve to 0.03x in FY24E from 0.24x in FY22E, with an average FCF generation of Rs14bn/year."

Commenting on the key risks, the brokerage has said there are 3 risks as follows "1)lower-than-expected growth in key segments and geographies; 2) supply constraints at the company and customer-end; and 3) adverse commodity and currency rates."

About - Bharat Forge

Bharat Forge Ltd is a global industrial conglomerate, a part of Kalyani Group, a US 3 billion conglomerate with 10,000 global workforce. Bharat Forge is engaged in the manufacturing and selling of forged and machined Components for the auto and industry sector. The company's interests include forging, automotive, energy, construction and mining, railways, marine, aerospace, and defence. The company is a part of Kalyani Group, headquarters in Pune, Maharashtra. The Khed City Special Economic Zone (SEZ) of Bharat Forge is the largest SEZ in the Pune district, covering 1,000 hectares (4200 acres) in Khed taluka.

Disclaimer

The stock has been picked from the brokerage report of Emkay Research. 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. Goodreturns.in advises users to check with certified experts before taking any investment decisions.