Bharat Forge derives 20 percent of its standalone revenue from North America heavy trucks segment
Bharat Forge shares fell 1.7 percent intraday on June 6 after orders for Class 8 trucks in North America in May were worst since July 2016.
Class 8 trucks orders in North America contracted sharply to 10,800 units, down 70 percent compared to the same month last year and 27 percent compared to previous month, reports CNBC-TV18 quoting ACT Research.
The decline is attributed to manufacturing backlog and sharp fall in spot freight rates along with large order backlog.
The stock was quoting at Rs 461.25, down Rs 1.90, or 0.41 percent on the BSE, at 1119 hours IST.
While having a neutral call with a price target at Rs 498, Nomura said average monthly order inflow trends remained weak and monthly truck production should come down after touching an all-time high in April.
For Bharat Forge, the brokerage has factored in flat volumes in export commercial vehicles for FY20 and 10 percent decline in FY21.
The company derives 20 percent of its standalone revenue from North America heavy trucks segment.
For domestic medium and heavy commercial vehicle, Nomura expects 10 percent /(-5 percent) revenue growth for the company in FY20-21. It expects only 12 percent EPS CAGR over FY20-21.
The brokerage said there is a downside risk to earnings from rising tariff wars in the US and hence the scope for further re-rating is limited.
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