MOSL: BHARAT FORGE (Buy)-Above est-Recovery continues in 4Q-Expect ramp-up in FY18
​BHARAT FORGE: Above est; Recovery continues in 4Q; Expect ramp-up in FY18
(BHFC IN, Mkt Cap USD3.9b, CMP INR1085, TP INR1242, 15% Upside, Buy)
4QFY17 saw tonnage increase by 5% YoY (+17% QoQ) to 55,189MT (est. of 52.6k), along with an improvement in realizations by 6% YoY (+2% QoQ) to INR204k/tonne (est. of INR205k). Net revenues rose 11% YoY (+19% QoQ) to INR11.3b (est. of INR10.8b). FY17 revenue declined 11% YoY to INR38b.
Export revenue grew ~23% QoQ (+12% YoY) led by a recovery in Industrial segment on a sharp revival in Oil & Gas segment. Domestic revenues grew 17% QoQ (+11% QoQ) led by Auto segment (+20% YoY). Overall non-auto revenue grew strongly by ~48% YoY, with the share rising to 42% from 31% in 4QFY16.
EBITDA margin expanded 80bp QoQ (-180bp YoY) to 28.4% (est. of 28.6%), restricted by INR100m (90bp) of one-time impact of wage settlement. Adj. PAT grew 9% YoY (+40% QoQ) to INR1.8b (est. of INR1.6b) for 4QFY17, but fell 17% YoY to INR5.6b for full-year FY17.
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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