Buy Bharat Forge; target of Rs 601: Emkay Global Financial
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 11, 2020.
November 13, 2020 / 12:30 PM IST
Emkay Global Financial's report on Bharat Forge
Q2FY21 results were subdued due to weakness in CV and Industrial segments, especially in overseas markets. Revenues at Rs8.8bn missed estimates (Rs10.6bn), owing to lower-thanexpected overseas Auto revenues. EBITDA margin contracted 500bps to 18.8% (est.:19.6%). We expect a strong recovery with growth of 28%/34% in H2FY21/FY22, led by Automotive and Domestic Industrial segments. In addition, customer additions and widening of product portfolio should support growth in FY22. Our positive view is underpinned by BHFC’s leadership position in automotive forgings, focus on diversification and expected recovery in the core segments. Medium-term performance will be also aided by high-potential segments such as Defense, Railways, Aerospace and Aluminum parts.
We expect revenue/earnings CAGRs at 11%/24% over FY20-23E. We retain Buy with a revised TP of Rs601, based on 25x P/E for the standalone business on FY23E (Sep’22E earlier). Retain OW stance in EAP.
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