Hold Bharat Forge; target of Rs 899: ICICI Direct

Hold

ICICI Direct's research report on Bharat Forge

Bharat Forge’s (BHFC) Q1FY24 standalone EBITDA margin was resilient at 26%, though EU operations turned EBITDA positive to 4.4% as against being in loss last quarter. Standalone revenue beat expectations despite this being a weak quarter for domestic CVs, with industrial exports driven by defence business execution driving revenue up QoQ as against CV segment exports remaining flattish QoQ. We are building in 14% volume growth for standalone BHFC in FY24 driven by growth in domestic CVs, exports PVs, defence business, aerospace business. Though we remain positive on FY24 business outlook of BHFC, we believe trading at ~26x FY25E earnings, all the good fundamentals are already factored in.

Outlook

BHFC has rallied by ~25% in past couple of months and with our revised DCF based target price of INR 899 (earlier INR773), implying 25x FY25E earnings, we downgrade BHFC to REDUCE (from Hold).

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Bharat Forge - 10 -08 - 2023 - isc