Q3FY23 Review: Bharat Forge: Standalone strong but subsidiary losses widen

16 Feb 2023 , 09:01 AM

Bharat Forge’s (BHFC) 3Q standalone Ebitda (excl. FX gains) was in line with analysts’ of IIFL Capital Services estimate. However, subsidiary losses widened and dragged down consol. performance substantially (Q3 consol. EPS was 70% lower than standalone). Standalone revenue growth was driven by strong performance in CV and PV in India and exports. Non-auto business was steady in Q3 but is likely to improve in FY24, as Defence revenues ramp up (sizeable recent order wins recently).

India CV and PV revenue growth is reflecting growth in underlying industry volumes. Analysts’ of IIFL Capital Services expect it to stay strong in the near term. They expect export CV growth to moderate in 2023, while export PV may continue to grow due to new order wins. They believe the fastest-growing segment in FY24 would be Non-auto, driven by the ramp-up of Defence revenue. In recent quarters, BHFC + its subsidiary KSSL have won orders worth ~Rs20bn, which will translate into revenue over a 2.5yr period, starting FY24.

Analysts’ of IIFL Capital Services do expect revenue growth to taper in FY25 as India and global CV/PV volumes are likely to peak out. They largely maintain their standalone EPS estimates following these results. But their consol. FY23/FY24 EPS get cut by 19% and 5% due to subsidiary losses.

Analysts’ of IIFL Capital Services maintain add with target price of Rs 910.