Motilal Oswal Suggests To Buy This Stock For 33% Upside

Brokerage firm Motilal Oswal recently suggested investors buying the stock of Bharat Forge for a 33% return. "After witnessing a cyclical downturn until FY21, accentuated by the COVID impact, BHFC is undergoing a cyclical recovery in its core businesses in both domestic as well as international markets", the firm mentioned.

Target Price

The Current Market Price (CMP) of Bharat Forge is Rs. 649. Motilal Oswal has estimated a Target Price for the stock at Rs. 860. The stock is expected to offer a 33% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 649
Target Price	Rs. 860
1 year return	33.00%

Company performance

The company's sales in FY 21 were recorded at Rs. 63.4 b, which is expected to be at Rs. 937 b. Their EBITDA in FY 21 grew 13.6%, which is expected to grow at 19.6%. The company's adjusted PAT in FY 21 was recorded at Rs. 0.9 b, which is expected to be at Rs. 9.4 b. Stricter CO2 emission regulations globally and the advent of electric vehicles (EVs) are leading to an increase in aluminum usage. BHFC's overseas subsidiaries are witnessing a strong demand of aluminum-forged components for chassis from EVs and hybrid PVs and hence, the company has doubled its capacity to 40k tons from 20k tons

Comments by Motilal Oswal

According to Motilal Oswal, "Cyclical recoveries across key businesses and contributions from the new businesses are expected to propel a sharp recovery for Bharat Forge (BHFC) over the next 2-3 years. This along with a ramp-up in the overseas aluminum forging business is likely to result in a consolidated EPS CAGR of 24% over FY22-25E. We see upside to our estimates from a) the US aluminum capacity, b) the recent acquisitions in the industrial business and c) foray into the e-mobility business. The stock trades at 25.4x/19.6x FY23E/FY24E consolidated EPS, respectively. BHFC is our top pick in the auto component industry."

About the company

BHFC is a part of the Kalyani Group, a USD 3 billion conglomerate with a 10,000 global workforce, they have the largest repository of metallurgical know-how, design and engineering expertise, and manufacturing prowess. BHFC has a relatively smaller contribution from renewable energy and industrial segments in India. The acquisitions of Sanghvi Forgings and JS Autocast are targeted towards reinforcing its presence in these segments. BHFC has been working on building its capabilities in components for EVs across vehicle segments through organic initiatives.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. 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.