Last Updated : Feb 09, 2018 03:25 PM IST | Source:

Bharat Forge hits record high; analysts expect stock to give up to 25% return post Q3 nos

IIFL expects a 24 percent FY17-20 PAT (pre-exceptional) CAGR. Valuations appear attractive, hence it maintained Buy rating on the stock with a one-year price target of Rs 950 per share.

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Bharat Forge shares gained 1.8 percent intraday to hit a fresh record high of Rs 775.10 on Friday as brokerage houses remained positive on the stock after strong Q3 earnings and expect it rally up to 25 percent over next 12 months.

The stock had rallied 7.77 percent in previous session. At 13:56 hours IST, it was quoting at Rs 766.10, up Rs 4.90, or 0.64 percent on the NSE.

Bharat Forge has reported healthy earnings growth in quarter ended December 2017, driven by strong commercial vehicles business and continued momentum in exports.

Consolidated profit growth of 77.4 percent at Rs 228 crore year-on-year was slightly ahead of CNBC-TV18 poll of Rs 221 crore. Revenue from operations grew by 47.4 percent to Rs 1,391 crore compared to Rs 944 crore in same quarter last fiscal.

Bharat Forge expects to see continuation of strong underlying macros supporting demand improvement across geographies and businesses.

"Demand in Q4 is expected to be stronger compared to Q3 driven by continued growth in domestic commercial vehicle cycle," Founder, Baba Kalyani said.

Shipment tonnage increased sharply by 38.2 percent year-on-year and 10.9 percent quarter-on-quarter to 65,050 tonnes, the highest in last 8 quarters.

Despite sharp increase in commodity prices, manufacturing cost and rupee appreciation, EBITDA (earnings before interest, tax, depreciation and amortisation) growth of 59.8 percent YoY at Rs 416.3 crore and margin expansion of 230 basis points at 29.9 percent in Q3 were largely in line with analyst estimates of Rs 394 crore and 30 percent, respectively.

Brokerage houses remained positive on the stock and expect the stock to give up to 25 percent return post Q3 earnings.

Brokerage - Edelweiss | Rating - Buy | Target - Rs 930

Bharat Forge has returned 51 percent to stakeholders in the past 12 months, largely led by strong commercial vehicle (CV) recovery (NAFTA + India) and sturdy industrial growth.

The research house remained optimistic led by: a) strong CV cycle in US/India as evident from 36 percent YoY growth in CV sales in past six months with encouraging management commentary for CY18E; b) quarterly run rate of oil & gas is close to previous peak levels and likely to stay strong, driving robust 30 percent CAGR in industrial export revenues over FY17-20E, led by oil & gas/aerospace ramp up; c) cyclical uptick is well complemented by Bharat Forge's strategy of improving value-added machined components across segments, especially aerospace, PV, oil & gas which augurs well for profitability with significant RoE/RoCE ramp up.

It maintained Buy rating with a revised target price of Rs 930 (Rs 850 earlier).

Brokerage - CLSA | Rating - Buy | Target - Rs 915

CLSA said growth outlook looked strong given sharp cyclical upturn in export segments and hence it raised FY18-20 EPS estimates by 1-4 percent post Q3 earnings.

Valuations At 30x FY19 PE are not cheap but should sustain, it feels. It has maintained Buy rating and increased target price to Rs 915 from Rs 905 per share.

Brokerage - Deutsche Bank | Rating - Buy | Target - Rs 830

Deutsche Bank has maintained Buy rating on the stock with a target price at Rs 830 per share as it posted strong revenue growth across all segments in Q3FY18.

Q3 results strengthened revenue growth trajectory conviction. "We continue to see recovery in business drivers and expect revenue/EPS to grow at CAGR of 14/28 percent over FY18-20," it said.

Brokerage - Motilal Oswal | Rating - Buy | Target - Rs 880

Motilal Oswal said strong order book, coupled with a structural improvement in business quality driven by a shift toward technology-intensive business, will drive strong around 39 percent EPS CAGR in FY17-20.

It has upgraded FY19 and FY20 EPS by 2 percent each to factor in higher growth in the US automotive segment. It has maintained Buy rating on the stock with a target price of Rs 880.

Brokerage - IIFL | Rating - Buy | Target - Rs 950

Bharat Forge is set to witness multifold growth in all its segments. CV exports are gaining traction from strong class VIII sales in US markets where estimates for CY18 range from 10-12 percent YoY growth. Domestic CV market is also looking upbeat.

Margins will remain strong as mix tilts towards higher margin products.

IIFL expects a 24 percent FY17-20 PAT (pre-exceptional) CAGR. Valuations appear attractive, hence it maintained Buy rating on the stock with a one-year price target of Rs 950 per share.

Brokerage - Credit Suisse | Rating - Neutral | Target - Rs 780

Credit Suisse has maintained its Neutral rating on the stock with increased target price at Rs 780 from Rs 730 per share as it said while Q3 was fairly strong, base will get tougher from Q4.

It prefers Motherson Sumi over Bharat Forge.

The company is a highly cyclical business and US business may hit a cyclical peak in FY19.
First Published on Feb 9, 2018 03:25 pm
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