Bharat Forge’s March quarter standalone revenue and Ebitda came in line with analyst estimates but a higher defense revenue and margin forecast led a couple of analysts to increase their FY25 and FY26 earnings per share forecast by up to 20 per cent. But they differ from stock valuations after a 14 per cent rally on Wednesday and 82 per cent rise on the counter in the last one year.
Nuvama said while defense growth is likely to remain robust, core segments such as CVs, construction equipment, tractors and oil & gas are expected to register weak performance, limiting revenue/EPS CAGR to 8 per cent/10 per cent over FY24–26E.
Subsidiaries are expected to see robust growth and positive earnings in FY26. This brokerage suggested a target of Rs 1,160 on Bhat Forge against Rs 1,080 earlier. “In light of the expensive valuation, we retain ‘Reduce’ rating,” it said.
Analysts said auto exports are likely to be underdued. Domestic CV/PV demand may moderate after a robust 22 per cent CAGR in domestic auto in FY21–24 due to pent-up demand having eased off and expectations of moderation in infra spending by the government, they said.
“After a strong 43 per cent CAGR over FY21–24, we expect industrials CAGR to be 14 per cent over FY24–26E. The Defense (27 per cent CAGR) segment will support the growth despite subdued prospects in global construction equipment, tractor and oil & gas segments. Ex-defence, revenue CAGR in industrials is 8 per cent versus a 30 per cent CAGR over FY21–24,” Nuvama said.
Emkay Global said Bharat Forge has continued to post robust order wins in defense, even as base business outlook has also improved against earlier expectations (see flattish performance in CVs; witnessing strong market share gains in other businesses).
“We build 13 per cent/28 per cent revenue/EPS CAGR over FY24-26E (upgrade EPS by 20 per cent/12 per cent in FY2025/26E backed by higher revenues and improvement in margins including at overseas subsidiaries). We upgrade to Buy from Reduce with revised target price Rs 1,650 (Rs1,100 earlier); we assign 21 times FY26E EV/Ebitda on consolidated basis (25x EV/Ebitda to defense and 20x EV/Ebitda to other businesses),” it said.
Disclaimer: Business Today provides stock market news for informational purposes only and should not be constructed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
