Stock Of The Day: Bharat Forge — Analyst Views, Key Levels to Watch
Nineteen out of the 29 analysts tracking the company have a 'buy' rating on the stock.
Bharat Forge Ltd. is buzzing in trade on Thursday after Bank of America upgraded the stock to a 'buy' rating from 'underperform'. It raised the target price Rs 1,450 apiece from Rs 1,000 earlier, implying a potential upside of 19% from the previous close.
Brokerages Constructive
Most brokerages were defensive on the company at the end of previous quarter, expecting the next few months to see tapering in the US and European markets.
Now, most have turned constructive with BofA being the latest in pointing out that the widely expected downturn might remain elusive to say the least. It sees the truck market downcycle, if any in the second half of the current financial year, will be short-lived.
They highlighted that large global truck manufacturers point to steady demand fundamentals with good signs, such as spot truck rentals.
Key Pre-Buy Trigger
The US Class 8 Truck Market is expected to see new emission norms starting from 2027. In the third quarter earnings call, Amit Kalyani, deputy managing director at Bharat Forge, clarified on the change in policy. He said that earlier on, as long as the engines were made before 2027, one could bypass the emission norms. But now the vehicles have to be rolled out by 2027, which would indicate the pre-buying has to happen before that in 2024–26.
BofA expects the upcoming EPA emission norms in 2027 to trigger pre-buy demand from 2025. It said the company's share price underperformance (-3% YTD) vs truck makers like Daimler and Paccar (+20%-30%) and Indian suppliers (+5–20%) make relative risk reward better.
Key Levels to Watch
Key support: Rs 1088 apiece (one-month low).
Resistance level: Rs 1330 apiece (two month high).
Shares of Bharat Forge were trading 6.33% higher at Rs 1,299.35 apiece on the NSE, compared to a flat benchmark Nifty at 11:54 a.m.
Diversification Strategy Bodes Well
Solid scale-up in defence, industrial and PV exports of forging parts are bearing fruit. The defence revenue could double to Rs 2,500 crore by fiscal 2026. Industrials segment to benefit from recent acquisition of JS Autocast, expecting a 12% CAGR in revenues between fiscal 2024 and fiscal 2026.
BofA has raised estimates by 7–15% with raising multiple to 18x FY26 EV/Ebitda.
Analysts Recommendations
Nineteen out of the 29 analysts tracking the company have a 'buy' rating on the stock, two suggest 'hold' and eight recommend 'sell', according to Bloomberg data.