Hold Bharat Forge; target of Rs 439: Prabhudas Lilladher
Prabhudas Lilladher recommended hold rating on Bharat Forge with a target price of Rs 439 in its research report dated November 11, 2020.
November 18, 2020 / 01:56 PM IST
Prabhudas Lilladher's research report on Bharat Forge
BHFC’s 2QFY21 performance was weak led by tonnage decline of ~24% YoY to 40.8k (PLe 44.6k). The sharp decline in volumes was led by ~33%/44% YoY exports decline in industrial/auto segments (~52% of SA revenues). While there has been some initial pickup in class 8 trucks (~19% of S/A revenues) along with ramp-up in PVs, the outlook for industrial remain weak with no major improvement in global Oil & Gas, aerospace segments. On the other hand, domestic auto/industrial segments performed well with +1%/-6% YoY. We believe that BHFC is much better placed than previous cycles with new products/customer additions both in auto/non-auto segments. However, the same is well captured in recent valuations expansions at 25x/20x FY22/23 consol EPS.
Hence we continue to maintain Hold with a revised target price of Rs439 (earlier Rs446) at 19x Sep-20 EPS. We cut FY21/22/23 EPS by ~16%/6/%/1% to factor in lower volumes especially in non-auto division.
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