Growth opportunities ahead across all segments – Bharat Forge

Update on Indian Equity Market:

On Wednesday, markets ended lower with Nifty closing 105 points to close at 15,635. PowerGrid (3.9%), SBILIFE (1.8%), and NTPC (1.6%) were the top gainers on the index while TATA MOTORS (-2.6%), ADANIPORTS (-2.4%), SHREECEM (-2.0%) were the top losers for the day. Among the sectoral indices,  MEDIA (-2.1%),  REALTY (-1.7%), and AUTO (-1.3%) were the top losers, and there were no Sectoral gainers.

Excerpts of an interview with Mr. Baba Kalyani, CMD of Bharat Forge on CNBCTV18 dated 7th June 2021 :

• Greenshoots have been seen in recovery over Q4FY21 despite lockdown, the industry is coming back to pre-covid levels but the management expects another quarter for things to fully recover.
• Oxygen shortage affected steel supply due to the 2nd COVID wave in Q4, but significant recovery has been seen. The semiconductor supply shortage is still an issue but there’s no reduction in demand for chassis and powertrains.
• Exports have seen tremendous growth across all segments over FY19 levels, and the company is benefiting from shifting from traditional supply chains in East Asia to India and the rest of the world.
• There is a huge Commodity Upcycle, especially in metals. However, the company is poised to directly pass on the hikes to its customers.
• The Company is expanding its capacities in the renewables sector, in order to reduce its reliance on Oil and Gas and focus on sustainable growth ahead.

Asset Multiplier Comments:

• Bharat Forge like most Industrial manufacturing has already seen the worst of its days due to the pandemic, and recovery seems to be well on track.
• Increased Government Expenditure, Focus on Atmanirbhar Bharat will help the company’s topline across all verticals in years ahead.

Consensus Estimates (Source: market screener website): 

• The closing price of Bharat Forge was ₹757/- as of 09-June-2021.  It traded at 42x/ 30x the consensus EPS estimate of ₹ 18/ 25/-  for FY22E/23E respectively.
• The consensus price target is ₹ 800/- which trades at 32x the EPS estimate for FY23E of ₹ 25/-.

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