Driven by a strong show on the exports front, Bharat Forge posted revenue growth of 23.7% year on year to Rs 832 crore. While domestic revenues declined 7% to Rs 360 crore due to slowdown witnessed in commercial vehicle sales, export sales surged 54.5% to Rs 480 crore. Good traction in European markets as well as Asia Pacific and favourable currency also helped bring in the gains. Purchase of commercial vehicles before the emission norms take affect in 2014 in Europe helped the company report a 90% growth in that market.
Overall volumes were up 14% over last year due to stronger exports, non-auto sales as well as a low base. The stock did not react much (up 2% over two trading sessions) as results though positive were broadly in line with expectations.
Despite the poor demand environment in the commercial vehicle space and muted domestic show, the company managed to improve its operating profit as well as margins. Superior product-mix, better cost control and currency gains saw operating profit grow 54.6% to Rs 215 crore; margins improved 520 bps year on year to 25.8%.
Good operational performance and higher other income helped net profit grow 98% y-o-y to Rs 94 crore for the quarter.
The performance of its subsidiaries all put together were better as the company discountinued the operations at Bharat Forge America and sold its Chinese joint venture stake. The company sold its 52% stake in the FAW Bharat Forge for Rs 175 crore. Prabhudas Lilladhar's Surjit Arora believes that exiting a loss making venture is a key positive for the company as it was a drag on the consolidated financials. The Chinese JV also had a debt of Rs 500 crore, which would get reduced from the company's overall debt burden.
The research firm has a positive view on the company given the strong free cash flow generation of the company estimated at Rs 800 crore to Rs 900 crore per year over the next two years. The target price for the stock is pegged at Rs 382, a combination of Rs 362 for the standalone business while the rest is for subsidiaries.
