Bharat Forge’s Q2FY19 revenues came in at Rs 1,679 crore, up 33.5% YoY, 13.5% QoQ above our estimate of Rs 1,558 crore. Domestic revenues came in at Rs 695 crore (up 31.5% YoY, 15.8% QoQ) while export revenues increased 34% YoY, 11.7% QoQ to Rs 943 crore. Its other operating income grew 59% YoY to Rs 41 crore Reported EBITDA margins came in at 25.9%, down 350 YoY, 310 bps QoQ, against our estimate of 29.4%. Reported PAT was at Rs 227.5 crore (up 11.7% YoY, down 3% QoQ) vs. our estimate of Rs 253 crore The Board has approved an interim dividend of Rs 2.5/equity share. Further, management believes sustained demand across its major business segments makes strong growth prospects for H2FY19E During Q2FY19, the two inflection points were 1) commencement of production & ramp up of aluminium products for domestic PV OEMs & 2) secured maiden orders from global OEM (in both domestic & export) for its centre for light weighting technology (CLWT).
Outlook
Thus, we value BFL on an SOTP basis with standalone business at 27x FY20E EPS of Rs 24.9 and other subsidiaries at Rs 28/share to arrive at a target price of Rs 700. We have a BUY recommendation on the stock.
