Motilal Oswal is bullish on Bharat Forge has recommended buy rating on the stock with a target price of Rs 595 in its research report dated May 20, 2019.
Motilal Oswal's research report on Bharat Forge
S/A revenue grew 14% YoY to INR16.7b (our est. INR17.3b), as realization grew 24.7% YoY to INR266k/t, but tonnage declined ~4% YoY to 62.7k/t. EBITDA was in line at INR4.8b, up 22% YoY. EBITDA margin at 29.1% (our est. 28.3%) expanded 30bp QoQ (+200bp YoY). Higher other income, Fx gains and lower depreciation aided adj. PAT to grow 63% YoY to INR3b (our est. INR2.7b). FY19 Revenue/EBITDA/PAT grew 23%/19%/35%.
BHFC would continue to outperform due to new products/customers. Also, noise surrounding the US-China trade war has resulted in the stock correcting over 30% from the recent highs (despite PAT growth of ~35% in FY19). Post correction, valuations are attractive at 19.8x/18x FY20/21 consol. EPS. Maintain Buy with TP of ~INR595 (~22x Mar-21 consol EPS).
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