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Bharat Forge (BHFC)
Automobiles
In-line quarter. Bharat Forge standalone net profit was in line with our estimates while
consolidated profit was 7% below our estimates due to lower-than-expected subsidiary
profits. Strong growths in exports and non-auto business were the key positives from
the result while domestic commercial vehicle revenues declined by 7% qoq, indicating
moderate growth for commercial vehicles in the coming quarter. We maintain our ADD
rating but revise our target price to Rs315 (from Rs320 earlier).
Strong growths in exports, non-auto offset weak performance of domestic commercial vehicle
Bharat Forge’s standalone net profit of Rs1,064 mn (+56% yoy, 9% qoq) was in line with our
estimates while consolidated profit before tax of Rs1,552 mn (+64% yoy, -2% qoq) was 7% below
our estimates due to lower subsidiary profits.
Domestic revenues of Rs4,909 mn (+5% yoy, flat qoq) were 9% below estimates due to lowerthan-
expected auto revenues.
Exports continued to post a strong growth (+58% yoy, 13% qoq) driven by strong growth in
heavy truck volumes in US and Europe. US export revenues grew by 43% yoy aided by
replacement demand for trucks while Europe export revenues grew by 76% yoy. Export nonauto
revenues also grew by 12% qoq and 24% yoy. We expect US heavy truck volumes to
continue to post strong growth but expect EU heavy truck volume growth to moderate in
2HFY12E.
Non-auto revenues formed 36% of net sales in this quarter versus 33% of net sales in 1QFY12.
Non-auto revenues from the new non-auto facilities were Rs1,807 mn (+86.4% yoy, 12% qoq).
Non-auto revenues from old facilities also rose by 21% qoq, which is encouraging in our view.
Subsidiaries reported revenues of Rs6,493 mn (+23.4% yoy, -9% qoq) boosted by strong
performance from European subsidiaries (+32% yoy) while the China subsidiary reported a flat
growth in revenues. Subsidiaries reported a profit before tax of Rs40 mn versus Rs111 mn in
1QFY12 despite flat qoq growth in EBITDA which, the company indicated, was due to exchange
loss and one-time expenses.
We maintain our ADD rating and make marginal changes to our earning estimates
We have increased our consolidated profit estimate for FY2012E by 4% and reduced our FY2013E
consolidated profit estimate by 2%. We have revised our target price to Rs315 (from Rs320 earlier)
which is based on the sum-of-the-parts valuation methodology
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bharat Forge (BHFC)
Automobiles
In-line quarter. Bharat Forge standalone net profit was in line with our estimates while
consolidated profit was 7% below our estimates due to lower-than-expected subsidiary
profits. Strong growths in exports and non-auto business were the key positives from
the result while domestic commercial vehicle revenues declined by 7% qoq, indicating
moderate growth for commercial vehicles in the coming quarter. We maintain our ADD
rating but revise our target price to Rs315 (from Rs320 earlier).
Strong growths in exports, non-auto offset weak performance of domestic commercial vehicle
Bharat Forge’s standalone net profit of Rs1,064 mn (+56% yoy, 9% qoq) was in line with our
estimates while consolidated profit before tax of Rs1,552 mn (+64% yoy, -2% qoq) was 7% below
our estimates due to lower subsidiary profits.
Domestic revenues of Rs4,909 mn (+5% yoy, flat qoq) were 9% below estimates due to lowerthan-
expected auto revenues.
Exports continued to post a strong growth (+58% yoy, 13% qoq) driven by strong growth in
heavy truck volumes in US and Europe. US export revenues grew by 43% yoy aided by
replacement demand for trucks while Europe export revenues grew by 76% yoy. Export nonauto
revenues also grew by 12% qoq and 24% yoy. We expect US heavy truck volumes to
continue to post strong growth but expect EU heavy truck volume growth to moderate in
2HFY12E.
Non-auto revenues formed 36% of net sales in this quarter versus 33% of net sales in 1QFY12.
Non-auto revenues from the new non-auto facilities were Rs1,807 mn (+86.4% yoy, 12% qoq).
Non-auto revenues from old facilities also rose by 21% qoq, which is encouraging in our view.
Subsidiaries reported revenues of Rs6,493 mn (+23.4% yoy, -9% qoq) boosted by strong
performance from European subsidiaries (+32% yoy) while the China subsidiary reported a flat
growth in revenues. Subsidiaries reported a profit before tax of Rs40 mn versus Rs111 mn in
1QFY12 despite flat qoq growth in EBITDA which, the company indicated, was due to exchange
loss and one-time expenses.
We maintain our ADD rating and make marginal changes to our earning estimates
We have increased our consolidated profit estimate for FY2012E by 4% and reduced our FY2013E
consolidated profit estimate by 2%. We have revised our target price to Rs315 (from Rs320 earlier)
which is based on the sum-of-the-parts valuation methodology
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