ICICI Direct is bullish on Bharat Forge has recommended buy rating on the stock with a target price of Rs 535 in its research report dated May 22, 2019.
ICICI Direct's research report on Bharat Forge
Bharat Forge (BFL) reported a healthy performance in Q4FY19. Revenues came in at Rs 1,669 crore, up 13.8% YoY, with growth being led by exports (up 18.1% YoY to Rs 963 crore), particularly from the Americas (up 26% YoY to Rs 707 crore). Industrial segment grew 31% YoY to Rs 708 crore while the CV segment lagged. EBITDA margins were largely maintained sequentially at 31.0% amid operating leverage benefits with gross margins down 50 bps QoQ. Consequently, reported PAT came in at Rs 299.5 crore.
For BFL, we factor in sales, EBITDA, PAT to grow at 3.1%, 4.4%, 7.2% CAGR, respectively, in FY19P-21E. We believe the company’s diversified product base and strategy of improving wallet share will support growth prospects during expected CV down-cycle. We also derive comfort from BFL’s healthy return ratios and ~8% CFO yield. Valuing the stock at 21x FY21E EPS of Rs 25.5, we arrive at a target price of Rs 535 and retain our BUY rating.
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