Bharat Forge Limited is an Indian multinational company involved in forging, automotives, energy, construction and mining, railways, marine, aerospace and defence industries. The company was founded by Nilkanthrao A. Kalyani on 19 June 1961. Headquartered in Pune, Maharashtra, it is the flagship company of the Kalyani Group. Bharat Forge’s Special Economic Zone (SEZ) named Khed City is spread over an area of 1,000 hectares (4200 acres) in Khed taluka and is the largest SEZ in Pune district.
Bharat Forge’s products include front axle beams, steering knuckles, connecting rods and crankshafts. The new strategy is to augment a strong global footprint in Lightweight materials. As part of its risk mitigation efforts, Bharat Forge diversified into a variety of industrial sectors including oil & gas, infrastructure, and marine. Some of BFL’s largest customers include Daimler Group, VW Group, Meritor and Dana etc. The company also has an extensive collaboration with major truck manufacturers.
Currently Bharat Forge is the “world’s largest single location forging facility consisting of fully automated forging press lines and state-of-the-art machining facility.” It has manufacturing operations at four locations in Maharashtra.
Quarterly Growth Walkthrough
Bharat Forge reported a standalone net profit of Rs 289 crore in the third quarter of FY23, which has shrunken by 14% from a profit of Rs 337 crore from a year ago of the same period. Sequentially, the company’s PAT rose by 7.85%. PAT declined in spite of performing with a strong growth on the top-line front.
Bharat Forge’s PAT in the December quarter of the previous fiscal year was bigger on behalf of an exceptional items gain of Rs 96 crore. Whereas the company has posted exceptional items gain of Rs 4.3 crore in December quarter of the current fiscal year.
Considering the top-line segment, revenue from operations was reported at Rs 1,952.10 crore in Q3FY23 which isa growth of 23% from ₹1,602 crore in Q3FY23.
Sequentially, revenue has grown due to a 9.4% growth in Export sales. Domestic revenues have slumped by 1.7% due to lower PV production & seasonal weakness in tractors.
EBITDA margins were computed at 25.2% in Q3 which have enhanced by a 90 bps QoQ supported by a finer product mix.
Segment wise performance
Considering the domestic business, during the quarter the company’s MHCV production has drawn a sequential growth of 10% whereas the Passenger Vehicles (PV) and LCV sector production has fallen by 14%. BFL’s revenues from the PV segment have deteriorated in line with industry volumes.
The industrial business pursues stable performance with the segment registering flat sequential performance mainly due to weak seasonality in Agri/tractor segment. December quarter of the previous year had revenue which included the provisions of Oxygen cylinders, by negation of this supplement, the yearly performance is calculated to an enhancement by 50%.
Considering the international business, automotive export revenues have showcased a growth on the sequential & yearly basis across Commercial & Passenger Vehicle segments. Revenues from the CV segment have risen by 5% whereas the PV segment revenues has risen by 10% sequentially.
Passenger vehicles revenue from export has made a historical record high of Rs 267 crore. Bharat Forge expects this momentum to persist as the demand sustains.
Bharat Forge said, North America CV and PV volumes pursues to display sturdy growth with the support of fleet replacement and strong demand for personal mobility. The European automotive market stays gloomy with the sole positive note being the MHCV truck volumes which have reported a yearly growth in CY22.
Word from the Board
B.N. Kalyani, Chairman & Managing Director said, in the December quarter, JSA performance has shown a sequential growth of 20% in topline and 52% in EBITDA. During the quarter, they have acquired fresh orders amounting to Rs 153 crore.
Kalyani said that, for the expansion of its presence in the castings space, JSA has signed a BTA with Inda Shell Mould to acquire its SEZ unit in SIPCOT, Erode. They expect the transaction to be executed by March 2023.
Additionally, Bharat Forge along with KSSL have secured contracts worth Rs 600 crores, raking the order book to Rs 1,950 crore as of 31st December 2022.
Kalyani added that the fulfilment of these orders and the export of the Artillery Gun system will initiate from the beginning of FY24.
Technical Analysis
Bharat Forge price is facing resistance in the zone around its lifetime high. It appears that operators have a strong presence, and the price is being denied climbing further. We can notice a flag pattern being formed which is marked by the white lines on the weekly chart. A good time to take an entry into this stock would be near the trend line marked by the blue colour. Currently the price is overextended above the 200-day exponential moving average which tells us that the stock is overbought, and the MFI is at 68 points which confirms that the stock is overbought. Traders may take a long trade if the price breaks above the flag pattern and short the stock if the price falls below the flag pattern.
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