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1QFY12 results
Bharat Forge reported strong results for 1QFY12 with standalone revenue
up 36% YoY (+4% QoQ) and PBT up 61% YoY (+4% QoQ). The top line
performance was undepinned by sequential growth in exports as well as
domestic revenues. YoY performance was stronger in exports (+67%).
Margins were up 10bps QoQ. Whilst revenues in overseas subsidiaries
were strong (+38% YoY), margin pickup remains modest. We have
downgraded margin estimates for foreign subsidiaries, underpinning a 5-
7% earnings cut, and downgraded target price to Rs375. Retain BUY.
1QFY12: strong performance, outlook somewhat uncertain
Bharat Forge (BFL) reported strong results for 1QFY12 with volumes +3% QoQ
(+24% YoY), in what is a seasonally weak quarter. Revenue, Ebitda and PBT grew
4%, 5% and 4% QoQ respectively. Whilst export revenues (+67% YoY) were
stronger than domestic (+19% YoY), sequential uptick was visible in both with
exports +6% QoQ and domestic revenues +3% QoQ. Ebitda margins at 24.3%
were up 10bps QoQ despite a 40bps drop in gross margins. At a segment level,
domestic CV growth has already slowed while exports have remained strong,
driven by fleet replenishment. While export customers have kept their rolling
demand estimates unchanged, macro headwinds could dampen this. Two factors
that may prevent a sharp falloff in exports are a low base (US/EU CV sales remain
well below the previous peak) and thin inventories in the system.
Non-auto business continue to gain traction
BFL is seeing improving traction in the non-auto businesses with revenue
contribution at 33% for the quarter and sales up 51% YoY. New non-auto facilities
contributed Rs1.6bn to revenues, +98% YoY. The company expects a gradual shift
to higher value-add products to drive margins and growth to continue as the
product pipeline supports continuing traction.
Healthy growth but modest margins in overseas subsidiaries
Whilst overseas subsidiary revenue growth was healthy at 38% YoY (+47% in
wholly owned subs, +15% in China JV), Ebitda margins remains subdued at 5.4%
and actually down slightly YoY. Whilst the company plans to focus on margins
going forward, the modest performance and uncertain macro outlook causes us to
take a cautious view and cut PBT estimates for overseas subsidiaries by 24-35%.
Downgrade earnings and price target
Whilst we have left standalone estimates unchanged, the cut to subsidiary
estimates drives a 5-7% cut to consolidated earnings. We have also trimmed our
target multiples and our price target to Rs375, 32% upside. There are continuing
risks to earnings from the DEPB regulation change (DEPB credits contribute ~14%
of consolidated PBT) and possible disappointments in exports. We like BFL due to
its diversified revenue base, profit growth and option value from JV’s. BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
1QFY12 results
Bharat Forge reported strong results for 1QFY12 with standalone revenue
up 36% YoY (+4% QoQ) and PBT up 61% YoY (+4% QoQ). The top line
performance was undepinned by sequential growth in exports as well as
domestic revenues. YoY performance was stronger in exports (+67%).
Margins were up 10bps QoQ. Whilst revenues in overseas subsidiaries
were strong (+38% YoY), margin pickup remains modest. We have
downgraded margin estimates for foreign subsidiaries, underpinning a 5-
7% earnings cut, and downgraded target price to Rs375. Retain BUY.
1QFY12: strong performance, outlook somewhat uncertain
Bharat Forge (BFL) reported strong results for 1QFY12 with volumes +3% QoQ
(+24% YoY), in what is a seasonally weak quarter. Revenue, Ebitda and PBT grew
4%, 5% and 4% QoQ respectively. Whilst export revenues (+67% YoY) were
stronger than domestic (+19% YoY), sequential uptick was visible in both with
exports +6% QoQ and domestic revenues +3% QoQ. Ebitda margins at 24.3%
were up 10bps QoQ despite a 40bps drop in gross margins. At a segment level,
domestic CV growth has already slowed while exports have remained strong,
driven by fleet replenishment. While export customers have kept their rolling
demand estimates unchanged, macro headwinds could dampen this. Two factors
that may prevent a sharp falloff in exports are a low base (US/EU CV sales remain
well below the previous peak) and thin inventories in the system.
Non-auto business continue to gain traction
BFL is seeing improving traction in the non-auto businesses with revenue
contribution at 33% for the quarter and sales up 51% YoY. New non-auto facilities
contributed Rs1.6bn to revenues, +98% YoY. The company expects a gradual shift
to higher value-add products to drive margins and growth to continue as the
product pipeline supports continuing traction.
Healthy growth but modest margins in overseas subsidiaries
Whilst overseas subsidiary revenue growth was healthy at 38% YoY (+47% in
wholly owned subs, +15% in China JV), Ebitda margins remains subdued at 5.4%
and actually down slightly YoY. Whilst the company plans to focus on margins
going forward, the modest performance and uncertain macro outlook causes us to
take a cautious view and cut PBT estimates for overseas subsidiaries by 24-35%.
Downgrade earnings and price target
Whilst we have left standalone estimates unchanged, the cut to subsidiary
estimates drives a 5-7% cut to consolidated earnings. We have also trimmed our
target multiples and our price target to Rs375, 32% upside. There are continuing
risks to earnings from the DEPB regulation change (DEPB credits contribute ~14%
of consolidated PBT) and possible disappointments in exports. We like BFL due to
its diversified revenue base, profit growth and option value from JV’s. BUY.
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