Emkay Global Financial has given Buy recommendation for Bharat Forge with a target price of Rs. 920 in its research report issued on Aug 23, 2021

Emkay Global Financial’s report on Bharat Forge

We analyzed the CY21 demand outlook provided by 20 entities, including global and domestic CV/PV OEMs, non-auto companies and industry associations, and the read-through was positive for BHFC. The HCV segment is expected to grow significantly by 10-40% in CY21 in North America and Europe on the back of increased freight activities and a strong order book. The outlook has broadly remained unchanged, despite supply constraints. However, growth expectations in India have been lowered due to Covid-19. Although the outlook for the global PV segment has been lowered, the segment is expected to clock double-digit growth, owing to the pending order book, better macros and low channel inventory. The outlook has been improved for the industrial segments, such as construction equipment and tractors. The global oil & gas segment is expected to witness a multi-year upcycle. BHFC’s revenue is expected to grow by 51% in FY22E, led by a strong performance in Automotive and Industrial segments. Moreover, customer additions, higher content and portfolio expansion should boost growth. Nascent segments, such as Defense, Railways, Aerospace, E-mobility and Light-weighting solutions, are expected to see robust growth.

Outlook

Our positive view on BHC is underpinned by its leadership position in automotive forgings, focus on diversification and an expected recovery in the core segments. We have a Buy rating on the stock with a TP of Rs920, based on 27x P/E for the standalone business on Sep’23E EPS.

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