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Hold Bharat Forge; target of Rs 785: Emkay Global Financial

Emkay Global Financial recommended hold rating on Bharat Forge with a target price of Rs 785 in its research report dated August 28, 2022.

August 29, 2022 / 03:06 PM IST
 
 
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Emkay Global Financial's research report on Bharat Forge


The demand outlook for CY22 provided by 23 global entities, including CV/PV OEMs, non-auto companies and industry associations, indicates tapering growth for forging companies. Weakening of the European and US economies does not bode too well for the HCV segment, which contributes over 25% to BHFC’s revenue. Constrained by flat GDP growth expectation, high finance cost and increasing operating costs, there is steep deterioration in the CY23 North America Class 8 production outlook to -6% (vs. +9% earlier), as per Americas Commercial Transportation. This downturn is likely to persist in CY24, with 8% drop in production, due to change in emission norms leading to notable price hikes of +15%. In comparison, India’s MHCV segment would see strong 28% growth in CY22. The global PV segment is likely to clock positive growth. The order book is healthy, but a muted H1CY22 and weakening macro outlook have led to reduction in growth expectations for CY22/23. The outlook for the industrial segments remains robust, owing to higher commodity prices and an upturn in the oil & gas segment, which is likely to see >35% growth in CY22.



Outlook


We retain HOLD on Bharat Forge with Sep-23 TP of Rs785, based on 24x Sep-24E EPS for standalone operations, factoring-in the limited upside potential and weak outlook for global CVs. Our valuation multiple is DCF based which also considers 15% premium for upside from nascent segments. Historically, valuation has been under pressure in global CV down-cycles.


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At 15:05 hrs Bharat Forge was quoting at Rs 723.80, down Rs 8.35, or 1.14 percent.


It has touched an intraday high of Rs 726.20 and an intraday low of Rs 710.75.


It was trading with volumes of 33,206 shares, compared to its thirty day average of 80,444 shares, a decrease of -58.72 percent.


In the previous trading session, the share closed up 0.80 percent or Rs 5.80 at Rs 732.15.


The share touched its 52-week high Rs 848.00 and 52-week low Rs 595.85 on 10 November, 2021 and 08 March, 2022, respectively.


Currently, it is trading 14.65 percent below its 52-week high and 21.47 percent above its 52-week low.


Market capitalisation stands at Rs 33,699.31 crore.


For all recommendations report, click here


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Bharat Forge - 290822 - emkay

Broker Research
first published: Aug 29, 2022 03:06 pm
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