Bharat Forge may reach Rs 850 by April

Bharat Forge may reach Rs 850 by April

By Rajiv Kapoor | 28 October, 2017

The world’s largest forging company, Bharat Forge Ltd is also the largest repository of metallurgical knowledge, offering full service supply capability to its geographically dispersed marquee customers—from concept to product design, engineering, manufacturing, testing and validation. Pune based and part of the USD 2 billion Kalyani Group, Bharat Forge is truly an Indian multinational. It is a technological driven global leader in metal forging, serving several sectors such as automotive, oil and gas, power, construction and mining, rail, marine and aerospace. Bharat Forge has manufacturing facilities spread across India, Germany, Sweden and France, manufacturing high performance critical and safety components for the automotive and non automotive sectors. Bharat Forge reported a strong Q1FY18 quarter, with a 33% revenue growth, beating most analysts’ estimates. Revenue was strong on the back of revival in the industrial segment, particularly oil and gas. It also witnessed robust growth in exports, especially in US markets, reporting a growth of more than 100% on the back of revival in demand from all sectors like passenger cars, rail, aerospace and majorly from commercial vehicles. Despite disruption caused by GST and other unfavourable conditions, Bharat Forge Ltd posted a good set of quarterly numbers, with new order wins from the domestic commercial vehicles’ segment, aiding strong revenue growth. The management also indicated that it has won new orders worth Rs 2 billion in the defence vertical, for supply of dual technology detection equipment during the next two years. Another subsidiary of the company, Kalyani Strategic Systems has also entered into a joint venture with Rafael of France to commission a new facility in Hyderabad for supply of defence equipment, including spike missiles. The net debt of the company is at comfortable levels, with net debt to equity at 0.2% times and is on course to become net cash in due course of time. Further, the upcoming BSV1 emission norms can help Bharat Forge consolidate its base and sharply increase the content with the launch of new products in the auto transmission basket. We believe the company’s efforts in the long run to be a diversified player in forging is likely to materialise over the coming years, with top line revenue growth seen at over 14% between FY18 and FY20. Most analysts remain optimistic on Bharat Forge, with revival in demand improving sentiments globally. The revival in commodity should result in a healthy order flow for the company. The company has recently given a healthy stock bonus issue of 1:1 to its shareholders and the share currently quoting at Rs 670 on the Indian bourses can appreciate to around Rs 850 by April 2018.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.

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