Bharat Forge: Revenues from US drive Q2 show

India revenue expected to double by 2018 on higher market share

In market parlance, Bharat Forge is in a 'sweet spot'. The company logged higher than estimated revenue and profit in the September quarter, thanks to recovery at home and in its key export market. It has bagged a large order from SAFRAN for complex forgings. The company is also seeing an uptick in demand for commercial vehicles (CVs) in the US and India.

Riding on the recovery wave, revenue grew 34.7 per cent over a year to Rs 1,138 crore in the September quarter, ahead of the Street's estimated Rs 1,022 crore. Domestic revenue grew 15 per cent to Rs 411 crore and export revenue by 50 per cent to Rs 697 crore. Shipments grew 23 per cent over a year to 52,560 tonne.

The improvement in sales and profit growth is not only sharp compared to a year ago but also sequentially. Total revenue jumped seven per cent sequentially. India revenue contracted on a sequential basis but exports grew 26.4 per cent. Operating income rose 14 per cent sequentially and 49 per cent over a year to Rs 331 crore. Even net profit jumped 20 per cent sequentially and 81 per cent year-on-year to Rs 174 crore. The Street was expecting a net profit of Rs 147 crore but the company beat that by 18.6 per cent. The company managed to improve margins by 270 basis points (bps) over a year to 29.1 per cent in the quarter. Sequentially, margins are down 30 bps.

Undoubtedly, the automobile sector in India is on road to recovery but Bharat Forge has fared better than expected in the home market. Its revenue from the CVs segment grew 29 per cent, compared with 20 per cent volume growth of CVs during the quarter. But robust demand in the US drove the performance. Demand for CVs has sustained in the US, on the back of strong economic recovery. With construction activity picking up, so has freight demand. Export revenue from the US grew 104 per cent over a year to Rs 428 crore. Europe and Asia saw single-digit revenue growth. However, foreign subsidiaries in the industrial segment remained a drag, as revenues from these declined 11.2 per cent during the quarter and operating profit declined by 36.7 per cent. The company is confident of doubling India sales by 2018 as it increases market share in the CV, passenger vehicles and industrial segments.