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Bharat Forge (BHFC IN)
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Ramp-up in exports boosts bottom line. Bharat Forge’s 3QFY11 consolidated profit
of Rs781 mn was 50% ahead of our estimates, driven by 31% qoq growth in exports.
Strong growth in exports were driven by recovery in US class 8 truck market, sharp
rebound in EU truck volumes and new order wins in the non-automotive business in
Europe. We maintain our ADD rating on the stock due to continued traction in nonautomotive
business and stronger-than-expected growth in exports.
Key highlights of the results
Standalone revenues increased by 8% qoq driven by 4.3% sequential improvement in tonnage
volumes and 3.7% qoq increase in average realizations per ton. Exports grew by 31% qoq
driven by recovery in commercial vehicle sales in US and Europe markets coupled with new
order wins in the non-automotive business. Non-automotive business now forms 37% of
standalone revenues vs 26% of revenues in 3QFY10.
Domestic revenues declined by 6% qoq in line with 8% sequential fall in commercial vehicle
production.
Standalone EBITDA margins (24.3% in 3QFY11) were, however, flat qoq due to sharp increase
in raw material costs while operating leverage benefits offset the raw material cost pressures.
Consolidated revenues grew by 11% qoq driven by improvement by standalone and subsidiary
performance. Subsidiary revenues grew by 16% sequentially. Consolidated EBITDA margin of
18.1% increased by 60 bps qoq due to 250 bps qoq improvement in subsidiary EBITDA margins.
Subsidiaries (excluding China) reported a loss of Rs45 million despite a sharp improvement in
EBITDA margins. Subsidiary performance has deteriorated slightly since posting a profit in
1QFY11 but we believe restructuring actions by management could improve profitability of the
subsidiaries. China subsidiary has turned profitable in CY2010.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Bharat Forge (BHFC IN)
Auto Components
Ramp-up in exports boosts bottom line. Bharat Forge’s 3QFY11 consolidated profit
of Rs781 mn was 50% ahead of our estimates, driven by 31% qoq growth in exports.
Strong growth in exports were driven by recovery in US class 8 truck market, sharp
rebound in EU truck volumes and new order wins in the non-automotive business in
Europe. We maintain our ADD rating on the stock due to continued traction in nonautomotive
business and stronger-than-expected growth in exports.
Key highlights of the results
Standalone revenues increased by 8% qoq driven by 4.3% sequential improvement in tonnage
volumes and 3.7% qoq increase in average realizations per ton. Exports grew by 31% qoq
driven by recovery in commercial vehicle sales in US and Europe markets coupled with new
order wins in the non-automotive business. Non-automotive business now forms 37% of
standalone revenues vs 26% of revenues in 3QFY10.
Domestic revenues declined by 6% qoq in line with 8% sequential fall in commercial vehicle
production.
Standalone EBITDA margins (24.3% in 3QFY11) were, however, flat qoq due to sharp increase
in raw material costs while operating leverage benefits offset the raw material cost pressures.
Consolidated revenues grew by 11% qoq driven by improvement by standalone and subsidiary
performance. Subsidiary revenues grew by 16% sequentially. Consolidated EBITDA margin of
18.1% increased by 60 bps qoq due to 250 bps qoq improvement in subsidiary EBITDA margins.
Subsidiaries (excluding China) reported a loss of Rs45 million despite a sharp improvement in
EBITDA margins. Subsidiary performance has deteriorated slightly since posting a profit in
1QFY11 but we believe restructuring actions by management could improve profitability of the
subsidiaries. China subsidiary has turned profitable in CY2010.
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