Emkay Global Financial is bullish on Bharat Forge has recommended buy rating on the stock with a target price of Rs 601 in its research report dated November 17, 2020.
Emkay Global Financial's report on Bharat Forge
Demand outlook by global and domestic CV/PV OEMs, non-auto companies and industry experts provide a positive read-through for BHFC. The HCV segment is expected to rebound strongly in CY21 across regions on 15-30% growth in North America, 10-20% in Europe and 100%+ in India, owing to freight recovery, order growth and low inventory. Global and domestic PV segments have already embarked the path of recovery and further improvement is expected ahead. Industrial segments such as Construction Equipment and Tractors are also expected to improve in CY21, but global Oil & Gas segment is likely to remain weak for a few more quarters on low crude prices and rig count. BHFC’s revenue growth is expected at 28%/38% in H2FY21/FY22, driven by a strong rebound Automotive and Domestic Industrial segments. Further, customer additions and the widening of the product portfolio should boost growth. Moreover, there is significant potential for segments such as Defense, Aerospace and Railways over the medium term.
Our positive view is underpinned by BHFC’s leadership position in automotive forgings, focus on diversification and an expected recovery in the core segments. We maintain Buy rating with a TP of Rs601, based on 25x P/E for the standalone business on FY23 estimates. Maintain OW stance in sector EAP.
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