Accumulate Bharat Forge; target of Rs 1701: Prabhudas Lilladher

Prabhudas Lilladher recommended accumulate rating on Bharat Forges with a target price of Rs 1701 in its research report dated August 09, 2024.

Broker Research

August 13, 2024 / 12:52 IST

Accumulate

Prabhudas Lilladher's research report on Bharat Forge

We upgrade our rating from “HOLD” to “ACCUMULATE” by assigning higher P/E multiple based on the positive growth outlook in the Defense business. BHFC Q1FY25 consolidated revenue grew by 5.9% YoY, coming in 4% lower than PLe/BBGe. Gross profit grew by 13.5% YoY, while margin improved by 370bps YoY to 55.3%. The strong improvement in gross margin was led by the execution of Defense orders and recovery in the Oil & Gas business. EBITDA grew by 20% YoY with a margin expansion of 212bps YoY to 18%. PAT was lower than estimates due to an exceptional item related to impairment in its Indian subsidiary. The strong order book in the Defense business and recovery in the Oil & Gas business augur well for overall growth. The CV & PV business growth was moderate during the quarter; however, the management expects gradual recovery in the upcoming quarters.

Outlook

Factoring the healthy growth outlook in its Industrial business (Defense, Oil & Gas, and others), we estimate its revenue/EBITDA to grow at a CAGR of 15%/28% over FY24-26E. We assign “ACCUMULATE” rating with a TP of 1,701, assigning it a P/E of 33x (previous 30x) on its FY26E EPS.

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