Accumulate Bharat Forge; target Rs 255: Dolat Capital

Dolat Capital is bullish on Bharat Forge and has recommended accumulate rating on the stock with a target price of Rs 255 in its February 08, 2013 research report.

"Bharat Forge, revenue down 29% YoY to Rs 6.7bn: While the domestic operations were down 9% YoY to Rs 3.5bn, its exports were down significantly by 33% to Rs 3.1bn. Domestic revenues were down due to sluggish automotive demand and a significant drop in sale to industrial sectors in India. Export revenues declined on back of global decline in demand coupled with production cuts and block closure by OEM to avoid pile up of inventory. Operating margins decline 120bps QoQ to 21.2% due to lower production The company’s operating margins declined 120bps QoQ to 21.2%. EBIDTA for the quarter was Rs 1.42bn, down 39% YoY.ý The company reported its PAT at Rs475mn converting into an EPS of Rs 2.0 for the quarter.

View and valuation: The management mentioned that all global OEMs are adjusting their production level to correct higher inventory levels. It expects to witness pressure in demand across both auto and non-auto in both domestic and overseas markets in the coming 2-3 quarters. Capacity utilization for India stands at ~50%, China at ~40% and Europe at ~65%. We introduce our FY15 estimates. We expect revenue to grow 13% CAGR over FY13-15. However, we cut our price target by ~17% to Rs 255 due to uncertainty and slowdown both in the auto and non-auto segments. The stock is currently trading at 12.1xFY15E. It has already witnessed an underperformance during the last three months. At CMP, we maintain Accumulate on the stock with a target price of Rs 255," says Dolat Capital research report.

Non-Institutions holding more than 90% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More