Hold Bharat Forge; Target Of Rs 490: ICICI Direct
ICICI Direct recommended hold rating on Bharat Forge with a target price of Rs 490 in its research report dated November 12, 2020.
Nov 17, 2020 / 12:42 PM IST
ICICI Direct's research report on Bharat Forge
Bharat Forge (BFL) reported a subdued Q2FY21 performance. Standalone revenues came in at Rs 882 crore (down 30% YoY), tracking 23.8% YoY decline in volumes to 40,775 MT. Total India revenues were at Rs 419.2 crore (down 13.9% YoY; CV down 2%, PV up 6.9%, industrial down 5.8%). On the international side, PV revenues de-grew 25.8% while CV revenues declined 52.2% and industrial revenues fell 33.1%. Among geographies, the Americas posted 49% revenue decline while the drop was more contained in Europe (down 20.8%). Standalone EBITDA margins were at 17.8%, adversely impacted by negative operating leverage, although gross margins expanded ~380 bps YoY. Reported standalone PAT was at Rs 70.3 crore, down 71.3% YoY. A positive development was PAT breakeven at subsidiaries/associates vs. loss of Rs 7.3 crore in Q2FY20.
For BFL, we expect 4%, 34.6% CAGR for consolidated sales, PAT respectively, in FY20-23E. Our estimates build in 18.7% margins by FY23E. The company’s progress on continued business de-risking away from CV and oil & gas segment & continued cost delivery are key monitorables. We maintain our HOLD rating, valuing BFL at 34x average FY22E & FY23E EPS of Rs 14.4 for a target price of Rs 490/share.
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