North America Class 8 truck orders fell 81 percent year-on-year to 9,800 units in July and the month-on-month decline was 25 percent.

Shares of auto ancillary and defence company Bharat Forge fell 5 percent intraday to hit 3-year low on August 6. North America truck orders declined sharply compared to the previous month. Bank of America Merrill Lynch also downgraded the stock and slashed price target, citing slow exports.

The stock lost nearly 40 percent of its value in the last one year to Rs 398.40, the lowest level since August 3, 2016. It was quoting at Rs 409.00, down Rs 10.10, or 2.41 percent on the BSE while Ramkrishna Forgings was down 6 percent at Rs 431, at 1132 hours IST.

North America Class 8 truck orders fell 81 percent year-on-year to 9,800 units in July and the month-on-month decline was 25 percent.

The truck orders in July 2018 stood at 52,122 units and 13,000 units in June 2019.

Bharat Forge receives 12 percent revenues from North American truck sales.

In addition, Bank of America Merrill Lynch downgraded the stock to neutral from buy and cut price target to Rs 450 from Rs 540 earlier as slowing export momentum is a risk to near-term earnings.

“Outlook for exports across Class 8 trucks & industrial forgings has weakened,” said the brokerage which expects standalone profit margin to shrink by 120 bps on a 2-year basis and sees significant room for growth from defence vertical & passenger vehicle exports.

While having neutral rating on Bharat Forge with a target price at Rs 439 per share, Japanese brokerage Nomura said monthly truck production should come down given low order inflows.

“There is a downside risk to our estimate of flat/15 percent decline in production volumes in FY20/21. We factored in flat volumes in exports commercial vehicles for FY20 & 15 percent decline in FY21,” said the brokerage which expects only 3 percent EPS CAGR over FY20-21 and sees scope for further re-rating limited.

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