MOSL: BHARAT FORGE (Buy)-Above est.-strong growth in non-autos drives EBITDA margin
​Bharat Forge: Above est.; strong growth in non-autos drives EBITDA margin
(BHFC IN, Mkt Cap USD3.9b, CMP INR728, TP INR844, 16% Upside, Buy)
- Better mix, price hikes lead to operating performance beat: Revenue increased 34% YoY to INR12.6b (est. of INR12.4b), led by tonnage growth of 27% YoY to 58.7MT (est. of 56.8kMT) and realizations growth of 5.9% YoY (-1.6% QoQ) to INR214.5k/ton (est. of INR219k). A strong recovery in the non-auto segment continued with growth of 78.5% YoY, while the auto segment revenue grew ~14% YoY. Domestic/exports revenue grew ~26% YoY/~56% YoY. EBITDA margin improved 160bp YoY/QoQ to 29.4% (est. of 28.6%), led by operating leverage. Adj. PAT grew 60.5% YoY (+16% QoQ) to INR2b (est. of INR1.9b), further supported by higher other income.
- Key highlights from earnings call: a) US class 8 truck build is expected to grow 10-12% (v/s current run-rate of 270-275k). b) BHFC is setting up a Light Weighting Technology (LWT) facility in AP, which will focus on aluminum/magnesium components catering to evolving emission norms and EVs. c) Continued improvement in underlying demand across geographies and segments to support both autos and non-autos. d) Have secured new orders of USD40m across segments. e) Ramp-up at recent acquisition Walker Forge Tenessee (US) with a revenue run-rate of ~USD35m (v/s ~USD27m at the time of acquisition). f) Appointed Mr Krishnakumar Srinivasan (ex-President-APAC, Eaton) to head new initiatives.
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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