Bharat Forge Ltd - Forging Success; Result Update Q3FY15:: Edelweiss

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Bharat Forge Ltd. (BFL) reported standalone adjusted PAT of INR 201 cr for Q3FY15, surpassing our our & consensus estimates by 6%/18%. The company reported its highest ever standalone EBITDA margins at 30.2%, led by better USD realization (+5% QoQ, Exports contribute 64% to sales).The management is optimistic about the US & Indian MHCV markets going forward and expects the US CV segment to be the main-driver for the sales in Q4 FY15. On the Non-Auto front, the company expects significant opportunity in the Locomotive and Aerospace segments to accrue in the years going forward.

Sales up 37% YoY led by US exports/Non Auto; Highest ever EBITDA margins

Standalone sales were up by 37% YoY, led by 122% YoY growth in US exports and 69% YoY growth in Non-Auto segment revenue. India sales also grew by 32% YoY on the back of a recovery in MHCV segment which grew by 41% YoY in Q3FY15. Sales tonnage increased by 25% YoY while realizations were driven by favorable USD-INR export realizations. The company reported its highest ever standalone EBITDA margins at 30.2%, led by better USD realization (+5% QoQ, Exports contribute 64% to sales). Gross margins improved by 280 bps QoQ.

Forging ahead into new segment/customers; US and India CV recovery to gain traction

In Q3FY15 the company has further strengthened its position in North America by acquiring one more marquee OEM customer. The company is also increasing its focus on the passenger vehicle segment by setting up two new forging facilities (capacity ~ 50,000 tonnes) in Pune. In light of downward pressure on crude prices BFL is looking to shift its focus from supplying requirements for new production and new exploration to providing maintenance requirements to its Oil & Gas sector customers. BFL remains largely focused on the Aerospace & Locomotive segments (setting up plant in Baramati) with each of the verticals having a revenue opportunity of about USD 100 mn going forward. As per the management the Q4FY15’s topline is to be driven by 1) HCV sales in the US which has witnessed record order booking in the December quarter and 2) improving MHCV industry sales in India.

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https://www.edelweiss.in/research/Bharat-Forge-Ltd--Forging-Success;-Result-Update-Q3FY15/10005535.html