ICICI Direct recommended hold rating on Bharat Forge with a target price of Rs 415 in its research report dated August 13, 2020.
ICICI Direct's research report on Bharat Forge
Bharat Forge (BFL) reported a weak Q1FY21 performance. Standalone revenues fell 68.3% YoY to Rs 427 crore tracking 70.7% YoY tonnage drop to 17,840 MT. Total India revenues were at Rs 167.8 crore (down 71.7% YoY; CV down 84.7%, PV down 85.8%, industrial down 51.2%). On the international side, PV revenues de-grew 52.6% while CV revenues fell 78.9%, industrial revenues fell 50.7%. Among geographies, Americas posted 74% revenue fall while the drop was more contained in Europe (down 41%). Standalone EBITDA was at negative Rs 3 crore, with margin performance likely impacted by inventory adjustment. Reported standalone loss at PAT level was at Rs 56.3 crore, supported by higher other income. At the consolidated level, the company reported Rs 1.9 crore as share in loss at subsidiaries/associates, down sharply from loss of Rs 21.4 crore in the previous quarter.
For BFL, we expect 1%, 13.2%, 35% CAGR for consolidated sales, EBITDA, PAT, respectively, in FY20P-22E. Progress on business de-risking from CV, continued margin delivery and improvement in profitability of European subsidiaries remain key monitorables going ahead. We maintain HOLD rating on BFL, valuing it at 30x FY22E EPS of Rs 13.7 for target price of Rs 415.
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