Bharat Forge Ltd. is set to clock "exponential growth" in defence exports backed by consistent order wins from multiple countries, according to Nomura.
The company on Monday announced that its subsidiary, Kalyani Strategic Systems Ltd., won two new export orders worth Rs 850 crore for the supply of components and armoured vehicle chassis.
Order wins from multiple geographies and for different products indicates that Bharat Forge is on a growth path in defence exports, the brokerage said, while retaining a “buy” rating with a target price of Rs 1,157, implying a potential upside of 18% over the next 12 months.
Nomura estimates that by fiscal 2026, Bharat Forge will record nearly Rs 2,000 crore in incremental revenue per annum. And it sees over 20% Ebitda margin for defence, as the company owns all its defence-related intellectual property.
With order wins and a large order book, the forging company's defence segment is likely to ramp up in fiscal 2025, Nomura said.
It cited adverse U.S. regulations on import tax and dollar devaluation is a downside risk that impact the company's earnings. Exports to the U.S. contributed 40% of Bharat Forge's standalone revenue in the first half of fiscal 2020.
On The Domestic Front
The Indian government has granted the company a licence for small arms and ammunition which entails it to participate in potential defence programmes in the future, the report said.
With the Indian Army expected to place an order for the 307 advanced towed artillery gun system that is to be sourced over the next three years, the brokerage forecasts a part of it will come to Bharat Forge.
Bharat Forge Trades At Lifetime High
The company's shares gained for the third consecutive day to trade above the Rs 1,000 mark for the first time. The stock climbed as much as 3.18% on Tuesday to trade at a record high of Rs 1,011.2 per share. It later pared gains to close at Rs 1,006 apiece.
The total traded volume stood at 2.7 times its 30-day average. The relative strength index was at 74.68 during closing, implying that the stock may be overbought.
Of the 30 analysts tracking the company, 21 maintain a 'buy' rating on the stock, two suggest a 'hold', while seven suggest a “sell”, according to Bloomberg data. The average of 12-month analyst price target implies a potential downside of 0.8%.
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