Bharat Forge shares rose by over 4.5 percent to Rs 1,175 per share on May 9, as tensions between India and Pakistan escalated. The company’s Chairman and Managing Director also told CNBC-TV18 that the government has called defence equipment manufacturers to Delhi for discussions.
Besides Bharat Forge, other defence-related stocks such as Hindustan Aeronautics, Bharat Dynamics, and Bharat Electronics also gained between 4 to 5 percent after India shot down several Pakistani drones and missile systems on May 8.
In its Q4 update, Bharat Forge reported standalone revenue of Rs 2,160 crore, reflecting a 7 percent decline year-on-year. However, EBITDA margin came in higher than expected at 29.1 percent, supported by lower raw material and employee costs.
Margin performance across subsidiaries was mixed. The overseas subsidiary showed improvement, with margins increasing to 1.2 percent from 0.3 percent in Q3. In contrast, the India subsidiary saw a decline in margins to 6.1 percent, down from 9.8 percent in Q3. The company has not provided any export guidance due to lack of visibility but said it would focus on improving profitability.
Japanese brokerage firm Nomura noted that increased interest in defence following the Pahalgam attack could potentially boost revenues. The firm pointed out that the delivery timeline for the ATAGs guns order has been shortened from three years to two. It also stated that the integration of the AAM from June could lead to an estimated 2 to 3 percent upside. As a result, Nomura maintained a ‘Neutral’ rating with a target price of Rs 1,237.
Meanwhile, Nuvama assigned a ‘Hold’ rating to the stock with a target price of Rs 1,230. While the defence order book is strong, Nuvama cautioned that core segments like commercial vehicles and global construction equipment and tractors are expected to show weak performance, which could limit standalone revenue and EBITDA growth.
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