Reduce Bharat Forge; target of Rs 320: Dolat Capital

"Bharat Forge's exports grew 31% to Rs 5.0 billion, while the domestic operations were down 8% YoY to Rs 4.4 bn. Domestic revenues were down due to sluggish M&HCV volumes which declined 20% during the quarter. Non Auto business grew by 16.4% in Q1 FY13 on a YoY basis with continued traction across sectors."

"The company’s operating margins declined 60bps QoQ to 25.1%. This is in line with the guidance given by the company. EBIDTA for the quarter was Rs2.35bn, up 13% YoY. The overseas operations’ EBITDA margins remained flat at 5.7% as against 5.6% in 1QFY12. The company reported its PAT at Rs1052mn converting into an EPS of Rs4.5 for the quarter."

Valuation

"The management mentioned that the Chinese Joint Venture has seen deterioration in performance on back of slowdown in China and slump in Commercial vehicle demand. Also, Europe continues to be uncertain. However, its business does not get affected much since it exports to Germany with high-end vehicles."

"We expect revenue to grow 12% CAGR over FY12-14. The stock is currently trading at 14xFY14E. We don’t see any significant upside from current levels and believe the stock is fairly valued. We recommend to book profits at current levels," says Dolat Capital research report.

Institutional holding more than 40% in Indian cos

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