Views on Bharat Forge 3QFY2014 results - Angel Broking

Views of Mr. Yaresh Kothari (Research Analyst - Auto & Auto Ancillary, Angel Broking) on Bharat Forge 3QFY2014 results:

Bharat Forge results in-line with estimates

"Bharat Forge (BHFC) reported in-line results for 3QFY2014 aided by strong growth in exports. The performance appears strong on a yoy basis mainly due to the base effect. On a sequential basis though, the results are broadly stable and are driven by exports (revenue up 3.5% qoq) even as the domestic operations (revenues down 13.8% qoq) continue to remain under pressure. Meanwhile the company has divested its stake in the China JV, FAW Bharat Forge (Changchun) Company to its joint venture partner, China FAW Corporation for a consideration of Rs. 175cr. The company expects the stake sale to positively impact the consolidated profitability and cash flows given that the entity has been incurring losses over the last two years.

For 3QFY2014, standalone revenues grew strongly by 23.7% yoy to Rs. 832cr led by a strong 54.5% yoy growth in export revenues. Domestic revenues, however, declined 9.2% yoy due to the continued slowdown in the domestic commercial vehicle sales. Total volumes surged 13.9% yoy primarily driven by exports and on a low base of last year. Net average realization too increased 7.5% yoy on the back of better product-mix and favorable exchange rate. The export performance was boosted by a strong growth across all the key geographies with Europe and US witnessing a growth of 89.6% and 26.1% qoq respectively. The EBITDA margins improved 461bp yoy to 25.8%, in-line with our expectations of 25.9%, driven by cost control measures, favorable realization on the exports front and also due to superior product-mix. Led by a strong operating performance, net profit grew 97.7% yoy to Rs. 94cr, in-line with our expectations of Rs. 93cr. At the CMP, the stock is trading at 13.4x FY2015 earnings. We maintain our Accumulate rating on the stock; our target price though is currently under review."

Bharat Forge 3QFY2014 Result Review (CMP: Rs. 337/ TP: Under review/ Recommendation: Accumulate)

Source : Equity Bulls

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