MOSL: BHARAT FORGE (Buy)-Strong beat led by Auto exports and non-Auto business
BHARAT FORGE: Strong beat led by Auto exports and non-Auto business
(BHFC IN, Mkt Cap USD4.8b, CMP INR775, TP INR975, 26% Upside, Buy)
- BHFC’s robust performance in 2QFY22 was driven by a strong beat in Auto exports and the non-Autos business, despite an impact from the semiconductor shortage. While all core businesses are seeing a sharp cyclical recovery, BHFC’s initiatives to diversify into aluminum/light-weighting and EV components are starting to fructify.
- We raise our FY22E/FY23E consolidated EPS by 5%/2.5% to account for a strong recovery in non-Auto. We are yet to build in a strong turnaround in its subsidiaries. We maintain our Buy rating with a TP of INR975 per share (28x Sep’23E EPS).
Favorable mix, operating leverage drives margin expansion
- Standalone revenue/EBITDA/adjusted PAT grew 81%/167%/319% YoY and 16%/13.5%/42% QoQ to INR16b/INR4.4b/INR3b in 2QFY22. The same grew 127%/398%/3,104% YoY in 1HFY22.
- Volumes grew 40% YoY and 7% QoQ to 57k tonne (est. 55.9k tonne). Realizations grew 29% YoY and 9% QoQ to INR279.5k/t (est. INR256.1k/t) owing to a better mix and steel cost pass through.
- The Auto/non-Auto business grew 90%/71% YoY. Auto exports (-5% QoQ) were stable, despite an impact from the semiconductor shortage in PV exports. Non-Auto grew 71% YoY and 37% QoQ, with a strong growth in both domestic and export revenue.
Bharat Forge Limited is engaged in the business of steel forgings, finished machined crankshafts, and front axles assembly and components. The Company's segments include Forgings and Projects (Capital goods). Forgings produces and sells steel forging products comprising forgings, finished machined crankshafts, front axle assembly and components, and ring rolling, among others. Projects (Capital goods) include engineering, procurement and commissioning business for power and infrastructure related projects. It manufactures a range of components for various sectors, including automobiles (across commercial and passenger vehicle), oil and gas, aerospace, locomotives, marine, energy (across renewable and non-renewable sources), construction, mining and general engineering. It has factories at Pune, Satara and Baramati. Its manufacturing facilities are spread across India, Germany, France and Sweden. It operates in Delhi, Noida, Hyderabad, Jamshedpur, Kolkata, Chennai and Mumbai.
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