Visit http://indiaer.blogspot.com/ for complete details Bharat Forge
Bharat Forge (BFL) reported a 68% yoy jump in standalone revenue at `719cr, largely
aided by ~60% jump in domestic revenue and around 84% jump in exports. EBITDA
margin expanded by 27bp yoy to 24.2%, down 96bp qoq, reflecting surge in steel prices.
The company recorded a 154% yoy jump in net profit to `68cr, beating our estimate of
`62cr for 2QFY2011, owing to higher-than-expected other income.
On a consolidated basis, performance was above our expectations with top-line growth of
56% yoy at `1,111cr (`711cr). EBITDA margins came in 18bp below our estimate at
17.5%, a jump of 416bp yoy on improved operating leverage in both domestic and
overseas operations. The company reported net profit of `60.6cr (net loss of `40.7cr in
2QFY2010), as against our estimate of `62cr, largely aided by improved operating
performance.
A substantial portion of BFL’s revenue comes from the CV segment, which has been on the
recovery path over the last few quarters and is currently in the mid-cycle. Moreover, a
major portion of the company’s consolidated revenue comes from the US, which has been
in the recessionary mode and is expected to come out of it in 2010. BFL’s non-auto
business is also expected to start contributing more from FY2011 and mitigate the effects
of the slowdown in the auto segment. Further, BFL has entered into a JV with Alstom and
NTPC to manufacture state-of-the-art supercritical power plant equipment in India. This JV
will help the company show healthy performance at the consolidated level.
We await more clarity on BFL’s overseas operations and progress on the JVs to revisit our
estimates. We remain positive on the company and recommend Accumulate on the stock
to play the turnaround in developed markets (US and Europe). We would be releasing a
detailed result update post the earnings concall with the management.
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