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Bharat Forge falls as much as four percent as CLSA downgrades stock to ‘sell’

This comes after shares of Bharat Forge had risen over 4 percent last week on the perception that the recent spread of Omicron across the US may not hamper robust economic growth in the region.

MUMBAI / January 12, 2022 / 10:29 AM IST

Shares of Bharat Forge fell as much as 4 percent to Rs 753.80 on the National Stock Exchange today after CNBC-TV18 reported that brokerage firm CLSA India has downgraded the stock to ‘sell’ from ‘buy’ citing a likely slowdown in export growth.

The brokerage firm also cut its price target for the stock by 23.3 percent to Rs 690 as it believes that valuations are “overly high”.

Shares of Bharat Forge had risen over 4 percent last week on the perception that the recent spread of Omicron across the US may not hamper robust economic growth in the region.

The firm depends highly on components it exports to Class 8 truck manufacturers in the US for its revenues, even though the company is diversifying its product base. However, Class 8 truck orders in North America have been on a downward trajectory over the past few months owing to the global semiconductor shortage.

In December, Class 8 truck orders in North America nosedived 55 percent year-on-year while in November they had fallen 81 percent on-year as shortage of semiconductors forced truck makers to cut down on production.

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In the September quarter, Bharat Forge’s export revenues grew merely 4 percent on-year.

That said, brokerage firms like Prabhudas Lilladher have been optimistic about the domestic sales of the company, which grew 43 percent on-year in the September quarter. The brokerage had upgraded the stock to ‘buy’ as it expects domestic industrial revenues to double in the next three years.

CLSA India also suggested that the revenues of Bharat Forge may also be hindered by a shift towards electric vehicles in the commercial vehicle market in North America. The ongoing shortage of lorry drivers in the US is forcing fleet operators to look at autonomous trucks, which largely run on electricity.

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Chiranjivi Chakraborty
first published: Jan 12, 2022 10:29 am
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