Bharat Forge share price: Shares of Bharat Forge, the auto components maker, fell for the second straight session on Tuesday (Feb. 13), after the company reported third-quarter results that fell short of estimates on Monday.
Additionally, management’s statement that it expects growth momentum in both domestic and export markets to slow down across sectors weighed on sentiment.
On Monday, the stock settled at Rs 1,130.95 on the NSE, down 13.93 percent and today, at the time of filing this news, the stock was trading down 3.11 percent at Rs 1,095.80.
A Preview of Bharat Forge’s Third Quarter Report
The auto components major on Monday (February 12) shared its third quarter results for the period ended December 31, 2023. The company reported a net profit of Rs 254 crore compared to Rs 79 crore reported in the corresponding quarter of the previous financial year (Q3 financial year 2023). The profit was estimated at Rs 305 crore, according to analysts at Zee Business.
Its revenue stood at Rs 3,866 crore, compared to Rs 3,353 crore a year ago. However, the research team had estimated the turnover at Rs 4,015 crore.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter stood at Rs 697 crore, against the estimate of Rs 685 crore.
The company’s margins stood at 18 percent versus an estimate of 17.1 percent.
Here’s what management said
“In Q4 and FY25, we expect growth momentum to moderate in both domestic and export markets across all sectors,” Bharat Forge Chairman and Managing Director said , B. N. Kalyani.
The company also informed that its board of directors has given in-principle approval to raise funds not exceeding Rs 500 crore through term loans, non-convertible debentures or any other debt instruments.
Weak guidance is worrying
Bharat Forge’s third-quarter profits were mixed, according to Zee Business Research. Revenues and profits were lower than estimates. Further, the company said in its commentary that it expects slow growth in Q4FY24 and FY2025, which weighed on sentiment.
In addition, the company also said that it is seeing moderation in domestic and international markets and profits from the aluminum and steel businesses will also be optimized for a period of up to one and a half years, note the researchers.
Experts further pointed out that Bharat Forge is yet to make operational improvements at its US factory and the recovery of European operations is still slow.
Bharat Forge Stock Price: Past Performance
The company’s shares fell about 10 percent last month, while in a year they have gained nearly 28 percent.
Should you buy or sell the shares?
Citi and CLSA maintained a ‘sell’ call on Bharat Forge with a revised target of Rs 800 and Rs 977, respectively.
CLSA noted that the company’s third quarter was better than expected, but growth momentum was slow. Management expects a slowdown in growth momentum in domestic and export markets across all sectors. Its subsidiaries remain in red, which weighs on the growth of consolidated profits.
Jefferies maintained an ‘underperform’ rating and reduced the target price from Rs 1,030 to Rs 950. The brokerage noted that the company’s growth is expected to slow down going forward. 3Q24 earnings beat estimates, but growth momentum will slow going forward. “The company’s defense business is growing rapidly, driven by new orders, while exports, domestic CV and PV businesses may slow down,” the brokerage added.
On the other hand, JP Morgan and Morgan Stanley maintained an “overweight” rating on Bharat Forge. Brokerages raised the target to Rs 1,250 and Rs 1,346, respectively.
According to JP Morgan, the company’s consolidated results were better than expected. Subsidiary margins continued to improve, but the trajectory was stronger in the Indian subsidiary while the foreign subsidiary lagged behind expectations.
The brokerage expects revenue growth to be moderate at 12 percent and 10 percent in FY25 and FY26, respectively, but EBITDA growth is expected to be higher at 21 percent and 19 percent, respectively, due to a turnaround of subsidiaries, according to JP. Morgan.
