Prabhudas Lilladher has given Hold recommendation for Bharat Forge with a target price of Rs. 701 in its research report issued on Jun 07, 2021
Prabhudas Lilladher’s research report on Bharat Forge
BHFC’s 4QFY21 result beat estimates on all fronts as Revenue/EBITDA/Adj. PAT came higher by 10%/23%/43% over PLe. This was led by i) 39% YoY growth in tonnage (due to strong traction in auto demand for both domestic/exports), ii) 7% YoY growth in realizations (better mix and RM inflation price through) and iii) cost control. Outlook for auto segment remained strong, benefitted by visible growth in Class 8 truck demand in FY22 along with ramp-up in domestic CV/sPVs. This coupled with healthy outlook for industrial (with improvement in global Oil & Gas), has placed BHFC better than previous cycles.
However, the same is well captured in recent valuations expansions at 36.2x/27.8x FY22/23 consol EPS. Factoring all this, we have increased target multiple for BHFC to 26x of FY23 EPS (v/s 24x earlier) and upgraded FY22/23 EPS estimate by 6.7%/7.5%. Hence we maintain Hold with a revised TP of Rs701 (earlier Rs602).