Prabhudas Lilladher's research report on Bharat Forge
We cut our FY24E earnings by c7%, given miss on revenue and margins at overseas subsidiaries. Bharat Forge (BHFC) 2QFY24 standalone adj. EBITDA margin at 27.4% (140bps QoQ) came slightly above PLe (26.8%), however, subsidiaries’ margins at +0.4% was –c330bps down QoQ and lower than PLe (4.7%). Strong growth was seen across segments in standalone, however, international subsidiary was lower QoQ given holiday season in key markets. Defense has been ramping up with Rs. 100bn run-rate in 2Q and BHFC sees strong double digit growth continuing for next two years. Aerospace is also expected to show a strong growth over the next few years.
Outlook
We remain positive on BHFC given (1) multiple growth drivers in domestic & export automotive segment (upcycle in CV industry & easing chip shortage helping PVs), (2) strong order book leading to a strong growth in high margin non-auto segment (3) contribution from defense & renewable segment and (4) rising traction in E-mobility division. Retain ‘BUY’ with TP of Rs 1,170 at 26x Sep-25E EPS (unchanged).
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