Bharat Forge’s Amit Kalyani On The Next Business Drivers

Bharat Forge Ltd. sees a recovery in domestic market and global demand for commercial vehicles, aluminum business and foray into electric vehicles as its growth drivers.

“This is the beginning of a new growth journey,” Amit Kalyani, deputy managing director at the auto parts supplier, told BloombergQuint in an interview. The first driver, according to him, will be the domestic business, including passenger and commercial vehicle segments, as demand revives after the second Covid-19 wave disruption; and an improvement in demand in the U.S.

Besides, the company’s two aluminum plants in Germany and the U.S. will triple its capacity, Kalyani said. Supply of components for battery-powered vehicles will be another big growth driver over the next two-three years.

Bharat Forge saw its revenue rise marginally over the preceding quarter to Rs 2,108 crore in the April-June period. Its profit after exceptional items fell 28% sequentially to Rs 153 crore.

Other Highlights (QoQ)

• Operating income rose 6% to Rs 450 crore.

• Ebitda margin expanded to 21.4% from 20.4%.

Brokerage View

Morgan Stanley

• Upgrades to ‘underweight’ with a target price of Rs 1,051, implying an upside of 28% from Friday’s close.

• Despite commodity headwinds and weak Indian business, company posted impressive numbers.

• Business gaining shares across segments in North America.

• Indian cyclical recovery, foray into EV components to be the next business drivers.

Jefferies

• Maintains ‘buy’ with a target price of Rs 1,050, implying an upside of 28% from Friday’s close.

• North American truck outlook strong; Indian freight picking up too.

• New light-weighting facilities in India and U.S. should ramp-up over the next two-three years.

• Domestic business should also improve with the Covid wave behind.

Nomura

• Maintains ‘buy’ with a target price of Rs 1,088, implying an upside of 33% from Friday’s close.

• Upcycle starting to play out.

• New segments like e-mobility, light-weighting and capex cycle in U.S. to be medium-term drivers.

Kotak

• Maintains ‘sell’ with a target price of Rs 555, implying a downside of 32% from Friday’s close.

• Cyclical upswing benefits not enough to justify valuations.

• Expect strong recovery across segments from FY22.

• 68% of the business is at risk because of the shift towards electric vehicles as the company is dominant in crankshafts.

Watch the full interview here: