Bharat Forge Q2: Analysts see export weakness bottoming, defence upside

While brokerages said the CV cycle appears to be nearing its bottom, they expect growth momentum to pick up from Q4FY26), driven by defence and aerospace segments.

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Bharat Forge Q2 review: Global manufacturing company Bharat Forge reported a mixed second quarter (Q2FY26) results, with steady margins and improving performance in subsidiaries offsetting export headwinds. 

 

While brokerages said the commercial vehicle (CV) cycle appears to be nearing its bottom, they expect growth momentum to pick up from the fourth quarter (Q4FY26), driven by defence and aerospace segments.

 

Nomura analysts said Bharat Forge’s defence business is helping cushion weakness in exports. The brokerage noted that standalone Q2FY26 revenue at about ₹1,950 crore was down 13 per cent year-on-year (Y-o-Y) and 6 per cent below consensus, though Ebitda margin of 28 per cent came in ahead of estimates. Lower raw material costs offset higher employee and other expenses, resulting in nearly in-line Ebitda. Net profit fell 14 per cent Y-o-Y, while overseas subsidiary margins were modest at 3.8 per cent.

 

According to Nomura, management commentary suggests Q3 could be similar to Q2, with growth expected to resume in Q4. The company won orders worth ₹1,500 crore in the first half of FY26, while its defence order book stands at ₹9,400 crore, excluding ₹1,400 crore for carbines. It also bagged an order worth ₹250 crore for naval underwater systems.  ALSO READ | TaMo CV lists today. How to trade commercial vehicle makers' stocks? 

The brokerage noted that Bharat Forge’s defence margins could improve further from current double-digit levels as revenue scales up. The recent consolidation of American Axle’s operations, contributing ₹290 crore in revenue and ₹9.2 crore in Ebitda in Q2, is expected to help the company expand into SUVs and light commercial vehicles. Nomura believes the export downcycle is near its trough and expects recovery by the second half of FY27, aided by potential benefits from the India-US trade deal.

 

It maintained a ‘Neutral’ rating on a Bharat Forge stock with a target price of ₹1,553, implying around 11 per cent upside, citing expectations of an upcycle by FY28, limited downside risks, and strong defence ramp-up.

 

Nuvama Institutional Equities highlighted that Q2 consolidated revenue rose 9 per cent Y-o-Y, slightly above estimates, while Ebitda grew 12 per cent – a 12 per cent beat – on improved mix. Subsidiaries’ losses narrowed sharply to ₹12.2 crore from ₹130 crore a year ago.

 

The brokerage raised its FY27-28 Ebitda estimates by up to 7 per cent to reflect stronger revenue assumptions. However, it noted that weakness in core segments such as CVs and global construction equipment would limit standalone revenue and Ebitda compound annual growth rate (CAGR) to 6 per cent each over FY25-28. 

 

Consolidated revenue and Ebitda CAGR are expected at 8 per cent and 10 per cent, respectively, driven by Indian subsidiaries. Nuvama retained a Hold rating with a target price of ₹1,350 (from ₹1,280).

 

Those at Emkay Global said Bharat Forge logged a steady quarter, with consolidated revenue up 9 per cent annually and Ebitda rising 12 per cent. Margins improved 80 basis points (bps) sequentially to 18 per cent, aided by cost rationalisation and a better product mix.  ALSO READ | BLS International shares gain 5% on Q2 profit jump; earnings breakdown here 

The brokerage noted that the management reiterated Q2 likely marked the bottom of the current downcycle, with gradual recovery expected from Q4 as global destocking eases and US demand stabilises. It expects defence revenue to see an uptick from FY27 as execution of Advanced Towed Artillery Gun System (ATAGS) orders begins in CY26. Tariff-related headwinds in US exports are expected to be offset by growth in domestic industrial and defence segments.

 

Emkay raised its target price to ₹1,450 (from ₹1,200) and retained an ‘Add’ rating, saying the worst of the downcycle is largely priced in.

 

Motilal Oswal Financial Services analysts said Bharat Forges standalone earnings of ₹315 crore were in line with expectations, though revenue missed estimates. Margins surprised positively despite weak demand, underscoring strong cost control.

 

The brokerage identified defence, aerospace, and JSA Autocast as key growth drivers, while a pickup in exports hinges on tariff relief for India relative to peers. With the acquisition of K-Drive Mobility factored in, Motilal Oswal raised its FY26-27 earnings estimates by 7 per cent but said the stock remains fairly valued at 54x/40x FY26E/FY27E consolidated EPS. It reiterated a ‘Neutral’ rating with a target price of ₹1,286.

 

That said, brokerages see Bharat Forge nearing the trough of its export cycle, with defence, aerospace, and new acquisitions expected to anchor growth over the medium term. 

 

Margins remain resilient, but broad-based recovery may hinge on easing trade barriers and a turnaround in global CV demand, analysts said.