Checkout Budget Highlights 2023HDFC Securities' research report on Bharat Forge
Bharat Forge (BHFC) Q3 consolidated earnings missed estimates, largely led by a higher interest burden even as operational numbers (including standalone performance) were in line. Overall, management believes FY24 is expected to be a turnaround year for BHFC, given: 1) the sharp uptick expected in the defense segment from here on, led by its new order wins in exports (worth INR 20bn) and the much-awaited order win for ATAGs in coming quarters; 2) huge outsourcing opportunities to BHFC in the renewables segment on the back of its recent acquisitions of Sanghvi Forgings (targeting 2x revenues in current fiscal) and JS Auto (new order wins worth INR2.5 bn); 3) turnaround expected in its overseas subsidiaries on the back of ramp-up of new Al forgings lines in US and Europe, for whom, capacities are fully booked with confirmed orders; 4) tremendous growth opportunities envisaged in the aerospace segment. This is apart from the strong demand momentum it is witnessing in auto segments, from both domestic and export markets.
Outlook
However, given the weaker-thanexpected Q3, we lower our FY23 estimates by 16%, while maintaining our FY24- 25 earnings, given the healthy outlook across key segments highlighted above. Reiterate BUY with an unchanged TP of INR 928.
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