Emkay Global Financial's report on Bharat Forge
Q4FY21 EBITDA margin of 25.5% came in above our estimate of 22% on higher share of exports, lower-than-expected impact of commodity inflation and cost savings. Revenue stood at Rs13.1bn, slightly above estimates, supported by robust exports. Our positive view on BHFC is underpinned by its leadership position in automotive forgings, expected recovery in core segments and robust growth in nascent segments such as Defense, Railways, Aerospace, E-mobility and Light-weighting solutions. We increase FY22/23 EPS forecast by 8%/9% to Rs19.8/Rs30, mainly due to higher growth assumptions for the Industrial segment. We are introducing FY24E EPS of Rs35.3, factoring in 13% revenue growth and EBITDA margin of 30.6%.
Outlook
We build in robust revenue/EBITDA CAGRs of 22%/ 35% over FY21-24E. ROIC (post tax) should expand from 5% in FY21 to 25% in FY24E. Maintain Buy with a revised TP of Rs830 (Rs760 earlier), based on 27x P/E for the standalone business on FY23E.
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