Bharat Forge Ltd Quarterly Results Update

Bharat Forge Limited (BFL), the Pune-based Indian multinational is a technology-driven global leader in metal forming, having a transcontinental presence across ten manufacturing locations, serving several sectors including automotive, power, oil and gas, construction & mining, locomotive, marine and aerospace.

It is India’s largest manufacturer and exporter of automotive components and the leading chassis component manufacturer in the world. BFL’s customer base includes virtually every global automotive backed by several decades of experience in component manufacturing & metallurgy, the company has embarked on an ambitious and exciting journey to redefine its already existing presence across several critical business verticals such as oil & gas, power, locomotive & marine, defence & aerospace, metals & mining, construction and general engineering.

Result Highlights

In the last quarter of FY23, Bharat Forge Limited (BFL) earned revenue of Rs. 1,997 crores, with growth in both domestic and export sales. Their standalone EBITDA was Rs. 488 crores.

It reported a standalone profit after tax (PAT) of Rs. 244.6 crores. However, the negative EBITDA margin of their foreign subsidiaries affected overall profitability for the third consecutive quarter, despite some improvement.

BFL expects to turn EBITDA positive in major markets within the next two to three quarters as they increase their aluminium forging capacity in the EU and the US.

Additionally, BFL has secured orders worth Rs. 4,000 crores in FY23 across defence, castings, and standalone businesses, indicating promising revenue opportunities for the future.

Valuation and Outlook

Because of global supply chain problems, the growth of passenger vehicles has been slow, and demand for commercial vehicles is expected to stay steady in both local and international markets. However, Bharat Forge Limited expects growth in industries other than automobiles, such as aerospace, defence, and oil & gas.

The e-mobility sector has a promising future, but the competition is still changing. It is expected to improve in the next few months because they have clear orders, the aluminium business is growing in the US and the EU, and there is less inflationary pressure in India and other countries.

Key Concall Highlights

  1. Industrial and energy segment revenue increased by 21% quarter on quarter due to higher volumes and improved product mix. The company aims to expand its presence in the renewable energy sector.
  2. The management expects better performance in Q1FY24 compared to Q4FY23, with anticipated profitability in Europe and the US business in Q1FY24 and Q3FY24, respectively.
  3. The aerospace business, which contributes around 11% of industrial revenue, is expected to grow by 30-40% and generate Rs. 500-600 crores in the coming years.
  4. Defence orders include a flagship artillery gun order with revenue of USD 100 million expected in FY24, along with an export order book of Rs. 2,000 crores.
  5. The acquisition of a new unit in Coimbatore and planned capex at the JSA plant will expand capacity from 40,000 to 120,000 tons, leading to revenue growth in the next two to three years.
  6. Interest costs are estimated to be around Rs. 60-65 crore per quarter going forward.

Click here to view the detailed report.

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