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Motilal Oswal Report
Bharat Forge Ltd. shares are likely to remain in focus after Motilal Oswal Financial Services retained its 'Neutral' rating on the stock and maintained a target price of Rs 1,931, citing near-term margin pressure and expensive valuations despite strong long-term prospects in defence, aerospace and industrial segments.
Valuation and view
Due to margin pressure witnessed in Q1 and losses in US operations, we have cut our FY27 earnings estimate by 7%. The GST rate cut has helped revive the domestic auto business, which augurs well for Bharar Forge. Further, the US Class 8 cycle appears to have bottomed out, with clear signs of revival.
Defense, aerospace, and JSA are likely to remain the key growth drivers for Bharat Forge over the coming years.
Motilal Oswal expects Bharat Forge to post a compound annual growth rate of 17%/24%/39% in revenue/ Ebitda/PAT over FY26-28.
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However, following the recent rally in the stock, most positives seem to be factored in (valuation now at 64 times FY27E EPS and 44x FY28E EPS).
The brokerage reiterates Neutral with a target price of Rs 1,931 per share (valued at 40x FY28E EPS).
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