Bharat Forge Q3 Review: Analysts Cautious On Exports, Global Demand Concerns

A decline in Bharat Forge Ltd.'s third quarter profit and revenue from operations has analysts largely cautious on the stock, as weak global demand weighed outlook.

The company's net profit fell 16.38% to Rs 212.78 crore in the October-December period, from Rs 254.45 crore in the same period last year. Revenue from operations was down to Rs 3,475.55 crore from Rs 3,866.4 crore.

Citi maintained a 'sell' rating on the stock, due to global demand concerns and delays in the ATAGs order.

Bharat Forge’s third quarter Ebitda was in line with Citi's estimates, though PAT, adjusted for minor one-off gains, was slightly below expectations due to a higher tax rate. The decline in domestic revenue was sharper than exports, with significant weakness in non-auto revenue, the brokerage noted.

Citi remained cautious, especially for the export market, with weak demand in Europe and uncertainty in the US regarding tariffs and demand slowdown.

Bharat Forge missed Emkay's consensus revenue and Ebitda estimates by 4% and 8%, respectively, due to softness in commercial vehicle demand, weakness in European operations, and lower defence revenue.

Order win momentum decelerated, and the management guided for a weak outlook for CVs in both domestic and European operations.

Amid a 38% correction in stock price from its recent peak, Emkay retained a 'buy' rating, but lowered the target price to Rs 1,300 per share.

Morgan Stanley maintained an 'overweight' rating, but cut the target price to Rs 1,366 from Rs 1,468. The brokerage noted that Q3 Ebitda was 8-9% lower than consensus, but remained bullish on the uptick in the US Class 8 cycle and strong growth in non-auto business verticals.

It also sees losses of international subsidiaries narrowing and a possible domestic Advanced Towed Artillery Gun System order.

Bank of America maintained an 'underperform' rating and cut the target price to Rs 985 from Rs 1,100. They highlighted that Europe’s woes drove the third quarter miss and the outlook remains bleak.

However, new verticals, such as aerospace, defence, and casting hold promise, according to the brokerage. They also mentioned that restructuring of overseas subsidiaries is due in two-three quarters.