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Thursday, 7 December 2017


Bharat Forge Ltd reported spectacular growth for the second quarter FY18. All parameters reported positive momentum with double digit growth in the current quarter. Revenue or Income From Operations rose 34% YOY at Rs. 12580 Mn in the current quarter against Rs. 9359 Mn same period previous year. Export Revenue grew 56% YOY at Rs. 7039 Mn against Rs. 4515 Mn whereas Domestic revenue jumped 26% and stood at Rs. 5541 Mn compared to Rs. 4394 Mn corresponding quarter previous year. EBDITA jumped at even higher rate of 46% from Rs. 2786 Mn to Rs. 4061 Mn in the current September quarter driven by product mix and operational efficiency. Profit After Tax galloped 61% YOY at Rs. 2037 Mn against Rs. 1269 Mn corresponding quarter previous year. Operating Expenditure jumped 29% YOY from Rs. 6882 Mn in Q2 FY17 to Rs. 8886 Mn in the current September quarter. On quarterly basis, operating expenditure declined 4% leading to robust operating margins. EBDITA margin expanded 372 basis points QOQ and 251 basis points yearly at 32.28% in the current quarter. Net Profit Margin too followed suit, rising 227 basis points sequentially and 264 basis points YOY. Net Profit Margin was reported at 16.19% against 13.56% same period previous quarter. One basis point is equal to 0.01%. Though operating expenditure was reined in, Depreciation, finance/interest costs & taxation grew 8%, 14%, 70% respectively in Q2 FY18. Other Income supported the bottom-line rising 18% YOY & 41% on quarterly basis in the current quarter. Other Income was reported at Rs. 366 Mn compared to Rs. 309 Mn corresponding quarter previous year.

Bharat Forge Limited (BFL), part of Kalyani Group is the world's largest forging company with transcontinental presence across ten manufacturing locations, serving automotive, power, oil and gas, construction & mining, rail, marine and aerospace. Bharat Forge manufactures a wide range of high performance, critical & safety components for the automotive & non-automotive sector.  It is India's largest manufacturer and exporter of automotive components and leading chassis component manufacturer in the world. Broadly, the revenue basket is divided into auto & industrials which grew 24% & 80% respectively YOY. Revenue can be further bifurcated into three streams, commercial vehicles, passenger vehicles & industrials. Commercial vehicles, Industrials & Passenger vehicles stood at Rs. 5495 Mn, Rs. 5354 Mn and Rs. 1044 Mn with yearly growth 29%, 79% & 2% respectively in Q2 FY18. Industrial segment contributed 45% to total revenue with 154% rise in international revenues whereas domestic growth was 19% in the current quarter.  Commercial vehicles contributed 45% growing domestically & internationally by 37% & 24% respectively. Passenger vehicles reported negative growth of 21% internationally whereas domestic growth was robust at 41% YOY.  The company has secured new orders worth $ 40 Mn annually across geographies and applications in the first half of FY18. Auto revenues are expected to rise further as auto industry is robust both in India and globally. On the other hand, industrials are supported by improved macro fundamentals globally. 

The company has also announced setting up of a Greenfield facility in Andhra Pradesh for light-weighting technology fully integrated facility to manufacture components, sub systems of light-weight material such as aluminium, magnesium and carbon fiber, for customers across the world including the EV space. The company will invest Rs. 2000 Mn in the first phase and the facility is expected to start production within 2 years. We recommend BUY for the stock for medium & long term investment with target price of Rs. 950. 

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