MOSL: BHARAT FORGE (Buy)-Above-estimate-strong performance across segments
Bharat Forge: Above-estimate; strong performance across segments
(bhfc IN, Mkt Cap USD5.5b, CMP INR761, TP INR880, 16% Upside, Buy)
- Better mix leads to operating performance beat: Revenue rose 47% YoY to INR13.9b (est. of INR13b), led by tonnage growth of 38% YoY to 65.1kMT (est. of 60.1kMT) and realizations growth of 6.7% YoY (flat QoQ) to INR213.8k/ton (est. of INR215.5k/ton). Auto and non-auto segments posted strong growth of 51% YoY and 52% YoY, respectively, during the quarter. Domestic and exports revenues grew ~33% YoY and ~61% YoY, respectively. EBITDA margin improved 230bp YoY (+60bp QoQ) to 29.9% (est. of 29.7%), led by a better mix and operating leverage. PAT grew 77.4% YoY (+12% QoQ) to INR2.3b (est. of INR2.1b).
- Key highlights from earnings call: a) Demand in 4Q is expected to be stronger than 3Q. b) US class 8 truck demand is expected to be strong in CY18. c) Outlook on domestic CV remains positive; BHFC is gaining market share in this segment, led by new products. d) Continued improvement in underlying demand across geographies and segments to support both autos and non-autos. e) Has secured new orders of USD60m across PV and industrial segments. f) Strategic investment of INR300m for a 45% stake in Tork Motorcycles to provide access to technologies in personal e-mobility space.
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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