Bharat Forge declines 11% in 3 days after subdued September qtr results

Shares of Bharat Forge slipped 4 per cent to Rs 478 in the intra-day trade on the BSE on Friday, falling 11 per cent in three trading days, after the company reported subdued September quarter (Q2FY21) results due to weakness in commercial vehicles and Industrial segments, especially in overseas markets. The stock of the auto ancillary company had hit a 52-week high of Rs 539 on November 10, 2020 in intra-day trade.

Bharat Forge reported 87.4 per cent year-on-year (YoY) decline in its consolidated net profit at Rs 27.2 crore in Q2FY21 on account of lower operational income. It had posted a profit of Rs 215.8 crore in Q2FY20. Total revenue was down 36 per cent YoY to Rs 1,376 crore from Rs 2,158 crore in the previous year quarter owing to lower-than-expected overseas auto revenues. EBITDA (earnings before interest, taxes, depreciation, and amortization) margin contracted 500 basis points to 18.8 per cent.

The management said consolidated quarterly weak financials reflect the full impact of Covid-19 lockdown on the company's overseas manufacturing operations in Europe and North America during April-June period. Despite governmental assistance, they recorded an EBITDA loss of Rs 33.4 crore.

"Looking ahead, the outlook for domestic market is positive but is subject to continued momentum on the investment in infrastructure," it said.

Analysts at Emkay Global Financial Services expect a strong recovery with growth of 28 per cent/34 per cent in H2FY21/FY22, led by automotive and domestic Industrial segments. In addition, customer additions and widening of product portfolio should support growth in FY22.

"Our positive view is underpinned by the company's leadership position in automotive forgings, focus on diversification and expected recovery in the core segments. Medium-term performance will be also aided by high-potential segments such as defense, railways, aerospace and aluminum parts," the brokerage firm said in result update.