Emkay Global Financial has given Buy recommendation for Bharat Forge with a target price of Rs. 840 in its research report issued on Mar 19, 2022

Emkay Global Financial’s report on Bharat Forge

The demand outlook for CY22/23 provided by 23 global entities, including CV/PV OEMs, non-auto companies and industry associations offers a positive read-through for forging companies. The HCV segment is expected to grow strongly by up to 12% in CY22 in the North America and Europe regions. Considering growth moderation in CY22 due to supply issues, CY23 is expected to see much stronger growth of up to 22%. In addition, the India CV segment is likely to grow by up to 30% in CY22. The global PV segment is expected to clock high single-digit growth in CY22. The order book remains healthy, but the CY22 outlook has been lowered due to supply constraints. The outlook for the industrial segments remains robust on strong commodity prices and a pick-up in infrastructure spending. The oil & gas segment may see 20%+ growth in CY22. In our view, Bharat Forge is expected to clock a revenue CAGR of 16% in FY22-24E, led by the continuation of cyclical recovery in the underlying auto and industrial segments in both domestic and overseas markets. Moreover, nascent segments, such as Defense, Renewables, Aerospace, Railways, E-mobility and Light-weighting solutions, have the potential to cross US$100mn each in revenues in the medium term.

Outlook

We reduce our FY23E/24E EPS by 6%/4%, factoring in delays in the pass-through of commodity inflation, higher freight costs and some reduction in revenues. We have a Buy rating on the stock with a Mar’23 TP of Rs840 (Rs950 earlier), based on 25x P/E (27x earlier) for the standalone business on Mar’24E EPS. We have reduced the target multiple, factoring in margin pressures over the next two years.

More Info

At 14:57 hrs Bharat Forge was quoting at Rs 669.00, down Rs 12.40, or 1.82 percent.

It has touched an intraday high of Rs 687.80 and an intraday low of Rs 667.00.

It was trading with volumes of 27,020 shares, compared to its thirty day average of 77,239 shares, a decrease of -65.02 percent.

In the previous trading session, the share closed up 0.95 percent or Rs 6.40 at Rs 681.40.

The share touched its 52-week high Rs 848.00 and 52-week low Rs 555.60 on 10 November, 2021 and 19 April, 2021, respectively.

Currently, it is trading 21.11 percent below its 52-week high and 20.41 percent above its 52-week low.

Market capitalisation stands at Rs 31,147.88 crore.

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