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HDFC Securities Institutional Equities
Bharat Forge Ltd.'s recent stock underperformance has been attributed to:
concerns around slowdown in Europe and U.S. amid geopolitical tensions;
the sharp rise in input costs (including energy), which has hurt margins; and
sustained supply chain disruption, which has limited demand momentum.
However, Bharat Forge's Q4 performance has allayed most of the fears, with consolidated earnings climbing up 18% YoY, led by strong performance across key segments.
Going forward, we expect standalone demand momentum to be strong, led by:
recovery in domestic auto demand and new defense orders;
strong export demand in U.S. Class 8 and new passenger vehicle orders.
We also expect subsidiary performance to remain upbeat on the back of new order wins and recent restructuring.
Also, near-term cost headwinds are likely to be partially mitigated by favorable currency movement and healthy revenue growth.
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