Bharat Forge share price jumps 14% in 2 sessions after Q4 results. Should you buy?

After a significant 13.32% surge in the previous trading session, Bharat Forge’s shares continued their winning streak in today’s session, edging up by another 0.54% to ₹1,412 each. This brings the cumulative rally over the past two days to 14%.

Although regarding the company’s results, which were released during Wednesday’s market hours, aligned with analysts’ estimates, management sounded optimistic demand in FY25, which increased investor sentiment towards the stock.

The company anticipates that FY25 will be a year of growth, primarily propelled by the defense business, the industrial casting business, and ongoing enhancements in capacity utilization within the overseas operations. The positive turnaround of the overseas business, combined with margin enhancements in other business verticals, is expected to yield robust profitability growth in FY25.

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The recent rally has propelled the stock to an increase of over 82% in one year, 114% in two years, and 206% in five years. Going forward, analysts suggest using dips to add long positions to the counter, considering the short- to medium-term time frame.

Technical Outlook

Osho Krishan, Senior Analyst, Technical & Derivatives, Angel One Ltd., said,” The stock has been in a stellar bull run, hovering in a cycle of higher highs and higher lows in all time frames. In the last couple of sessions that counter witnessed a strong spurt in price, volume soaring to record highs.”

From a technical standpoint, the recent developments have led to overbought parameters in the stock, which might attract some breather/profit booking in the short run. However, from a broader view, Osho Krishan said that the biases remain intact with the bulls.

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“On the level-specific front, the neckline of breakout placed around the ₹1,300 subzone is likely to cushion any blip, followed by the sacrosanct support of the cluster of EMAs around 1250–1220. It is advisable to use dips to add longs to the counter from a short- to medium-term time frame,” said Osho Krishan.

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Results Card

The company wrapped up the March quarter on a robust note, with a 16.6% emerging in topline to ₹2,329 crore, while EBITDA soared by 25.1% to ₹654 crore, yielding EBITDA margins of 28.1% in Q4 FY24. Over the full year, the topline expanded by 18.4% to ₹8,969 crore, and EBITDA emerged by 28.0% to ₹2,469 crore.

At the bottom line, net profit witnessed a remarkable 59% YoY growth to ₹390 crore, with FY24’s net profit tally at ₹1,425 crore, marking a substantial 36% YoY improvement.

A pivotal catalyst behind this robust performance was the fulfillment of defense export orders and the consistent ramp-up of export business across all segments except oil and gas. During FY24, Indian operations secured new orders worth ₹1,350 crore spanning automotive and industrial applications. This encompassed a healthy mix of both existing and new customers across traditional and innovative products.

Optimistic View

Following the company’s Q4 and FY24 performance, domestic brokerage firm Kotak Institutional Equities has raised its FY2024–26E consolidated EPS estimates by 2–6%. This increase is primarily driven by higher revenue growth assumptions, attributed to new order wins in the defense segment.

While the firm anticipates newer business segments to propel growth for the company in the upcoming years, it foresees limited growth opportunities for its core business. This limitation is due to heightened competitive intensity among domestic players in the export market and the potential risk of electrification in select segments, particularly in the PV and tractor segments, as well as the oil and gas segment.

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Kotak Institutional Equities estimates revenues of ₹28 billion from the defense segment in FY2026E.

“With an order book of ₹51.9 billion to be executed over the next 3–4 years, BHFC’s defense business is expected to be its key growth driver over FY24–26E. Further, strong traction in outsourcing opportunities from China and Europe to India, especially in the industrial segment, is likely to be the other key driver for BHFC going forward,” said Motilal Oswal.

“The company expects its aerospace business to double in the next 3–4 years. With the capacity ramp-up of overseas subsidiaries and new order wins with better pricing, its performance is likely to improve over FY24–26,” it added.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.