Prabhudas Lilladher's research report on Bharat Forge
We trim our FY24/FY25 earnings by c6%/2%, given slow ramp-up on the margin side of subsidiaries which led to miss on margins. Bharat Forge (BHFC) 4QFY23 standalone adj. EBITDA margin at 26.2% (+c90bps QoQ) came slightly above our estimate, owing to lower COGS. Gross profit/ton was flattish QoQ, as higher domestic mix was offset by higher mix in the CV segment. BHFC secured defense order wins for 307 ATAGs from Indian army, which will be executed over a 4-year period. Globally, CV and oil & gas segment outlook is stable/improving. Additionally, boost to revenues should come from new businesses like defense & aerospace and execution of order. We remain positive on BHFC given (1) multiple growth drivers in domestic & export automotive segment (upcycle in CV industry & easing chip shortage), (2) double-digit growth in high margin non-auto segment (3) contribution from defense & renewable segment and (4) rising traction in E-mobility division.
Outlook
Retain ‘BUY’ with TP of Rs 940 (earlier Rs. 960) at 25x Mar-25E EPS.
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