Two of three brokerages expect Bharat Forge shares to pull back up to 15% in the next 12 months after India’s leading forging company projected a moderate growth scenario for the last quarter as well as the next fiscal.
Bharat Forge shares tanked up to 6% to hit a low of ₹1,063.4 apiece on BSE in early trade on Tuesday, a day after the stock was drubbed more than 14% following the release of its third-quarter results. The stock fell the most in a single day on Monday since March 2022.
Brokerage CLSA assigned a ‘sell’ rating on Bharat Forge with a target price of ₹977 per share, implying a potential loss of 13.5% from Monday’s close.
While mentioning that the third quarter results were above estimates, CLSA said that the management expects growth momentum to moderate in both domestic and export markets.
Subsidiaries continue to be in red, which is dragging down consolidated profit growth, the brokerage noted.
Brokerage Jefferies also downgraded the target price on Bharat Forge to ₹950 per share with an ‘underperform’ rating. The target price suggests a potential downside of up to 15%.
“The company gave a cautious outlook as it expects growth momentum to moderate,” Jefferies said in a report. The brokerage also expressed concern over cyclical headwinds in the exports and Indian trucks sector, and on rich valuations of the company.
Jefferies cut the earning per share (EPS) estimate for FY24-26 by 7-10%. It also noted that the Q3 consolidated EBITDA rose by 56% YoY and 8% QoQ but was 5% below estimate.
However, Morgan Stanley painted a bull scenario for Bharat Forge with an ‘overweight’ rating and a target price of ₹1,346 per share, implying a potential upside of up to 19% in the next 12 months.
The brokerage mentioned that the stock reaction to moderate growth projection is overdone.
Standalone business revenue of Bharat Forge was 3% ahead of estimate and revenue is driven by domestic non-auto business, MS said in a report.
Domestic and export auto business was in line with estimates while defense business revenue and EBITDA were 28% and 14% ahead of estimates, it added.
“EV business was weaker while casting was in line. International subsidiary margins improved by 100 bps QoQ to 1.7% Vs the estimate of 2%,” Morgan Stanley said in a note.
The management has guided for moderation in growth momentum “across industries” in Q4FY24 and FY25, MS clarified on its call.
Bharat Forge reported a net profit of ₹377.8 crore for the December quarter, up by 31% over the year-ago period on the back of a favourable product mix and focus on cost optimisation.
Its revenue also rose by 16% year-on-year to ₹2,263.3 crore in the period under review.
Bharat Forge shares were trading 4.89% lower at ₹1075 apiece on BSE at 9.31 AM.
(Edited by : Asmita Pant)
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