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Geojit\’s research report on Bharat Forge
Bharat Forge Ltd (BFL) is a leading player in the forgings industry. The company is serving several sectors including automobile, power, oil and gas, rail & marine, aerospace & defence, construction, mining, etc. Q2FY22 revenue came at Rs.2,386cr.(+13.2% QoQ). This was largely on account of strong domestic growth of 40% QoQ. Export growth came lower at 4.9% due to chip shortage. Despite the input and logistics cost pressure, EBITDA margin came at healthy 21.4% similar to previous quarter. The demand in domestic market for both industrial & Automotive and export industrial segment continue to remain robust. However export automotive will witness subdued demand for near term. BFL’s 2W- EV associate Tork Motors has received FAME-II approvals. The company has also won orders for developing components for ECVs in the light truck segment. These should start from FY23 onwards. Amid crisis, the demand visibility looks robust on a medium basis for BFL, owing to growth coming from the domestic auto and Industrial sector. We value BFL at 16x EV/EBITDA on FY23E.
We value BFL on 16x EV/EBITDA on FY23E with a target price of Rs.861 and recommend Buy rating at CMP.
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