Emkay Global Financial has given Buy recommendation for Bharat Forge with a target price of Rs. 775 in its research report issued on Jun 07, 2022

Emkay Global Financial’s report on Bharat Forge

The demand outlook for CY22 provided by 24 global entities, including CV/PV OEMs, non-auto companies and industry associations, offers a positive read-through for forging companies. India’s MHCV segment is expected to witness a strong 28% volume growth in CY22. North America’s HCV segment is likely to grow by up to 12% and Europe up to 8% in CY22. The outlook for CY22 remains unchanged, supported by large order books. However, the CY23 outlook has moderated to 9% (vs. 22% earlier) on account of macro uncertainties. The global PV segment is likely to clock high single-digit growth in CY22. The order book is healthy, but the Russia-Ukraine conflict and China’s Covid lockdowns have created temporary supply issues. The outlook for the industrial segments remains robust owing to increased infra spends and an upturn in the oil & gas segment, which is likely to see up to 45% growth in CY22. For Bharat Forge (BHFC), we trim our FY23E/FY24E EPS by 3%/5% to account for some moderation in the demand outlook and lower margins. There are concerns about Europe/US recession (30% probability as per a Bloomberg survey). In a bear-case recession scenario, if we build in a 15% drop in exports (excluding oil and gas segment), our FY24E EPS declines by ~16% (please refer to page 4 for sensitivity analysis). Following the EPS revision, we expect a revenue CAGR of 14% over FY22-24E, aided by growth in auto/industrial segments in both domestic and overseas markets.


Moreover, nascent segments, such as Defense, Renewables, Aerospace, Railways, E-mobility and Light-weighting solutions, should provide support to overall revenues. Our revised TP of Rs775 (Rs810 earlier) is based on 24x Jun’24E EPS for standalone operations. Retain Buy.

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