Bharat Forge surges 16% post June quarter nos; here's what brokerages say

"The quarter gone by was impacted by the Covid-19 pandemic and the stringent measures adopted by countries to control the spread," the company said.

Bharat Forge shares ended nearly 16 per cent higher at Rs 502.80 on the BSE on Thursday even after the company reported a consolidated loss of Rs 127.3 crore for the quarter ended June 30. The company had posted a consolidated profit of Rs 171.9 crore in the April-June period of the previous fiscal. 

Revenue from operations came in at Rs 1,154.2 crore against Rs 2,327.8 crore in the year-ago period while its income during the April-June period declined to Rs 1,199.2 crore from Rs 2,372.7 crore in the year-ago period. CLICK HERE TO READ FULL REPORT

“The quarter gone by was impacted by the Covid-19 pandemic and the stringent measures adopted by countries to control the spread. The government imposed economic lockdown coupled with lower underlying demand had an adverse impact on sales," said BN Kalyani, Chairman & Managing Director.

Adding, "Looking ahead into the demand for the coming quarter, we are witnessing marginal improvement in demand across both domestic & export markets. We expect our domestic revenues to be flat as compared to Q2 FY20 while the exports will be lower than the levels witnessed in Q2 FY20. The sustainability in the recovery in underlying demand is a key factor to track in the coming months."

Post the result announcement, Prabhudas Lilladher has maintained a "Hold" rating on the stock with the target price of Rs 401. 

"While the ongoing cycle is negative for core segments such as commercial vehicles (nearly 39 per cent of consolidated revenues) and Oil & gas, ramp-up is visible in passenger vehicles (PV) and non-auto segment. We believe that Bharat Forge is much better placed than previous cycles with new products/customer additions both in auto/non-auto segments," the brokerage notes. 

Analysts with Motilal Oswal Financial Services (MOFSL) note that the company's 1QFY21 operating performance was commendable considering EBITDA breakeven at 20 per cent utilisation. "With enhanced capabilities, improved efficiency, low gearing, and a strengthened position in the global supply chain, Bharat Forge would come out stronger from this downcycle," the brokerage said in a report issued on August 12. It has a "BUY" rating on the stock with the target price of Rs 500. 

ICICI Securities believe that the recent government decision to impose import embargo on 101 defence products is expected to aid the company's diversification drive. "Localisation impetus in the company’s product suite (artillery guns, armoured vehicles, electronic components, etc) is seen leading to rapid growth in the division – albeit from FY22E. We factor in 3.2 per cent, 0.7 per cent domestic, export revenue CAGR in FY20P-22E," the brokerage said with the "HOLD" rating on the stock and the target price of Rs 415.