Bharat Forge's Strong Defence Orderbook To Ramp Up Revenue Over FY25: Nomura

Bharat Forge Ltd.'s multiple defence orders will result in a sharp ramp-up in its revenue over financial year 2024–25, according to Nomura Holdings Inc.

Both export and domestic defence orders are likely to start rolling in as the company has built a sizeable defence vertical with a large order book, the brokerage said in a note on Monday.

Kalyani Rafael—a joint venture of Kalyani Strategic Systems Ltd., a subsidiary of Bharat Forge and Rafael Advanced Systems Ltd.—has received several defence orders.

The JV won a contract on Monday to supply missile systems for a contract value of Rs 287.5 crore. It is expected to be executed over the next 12 months. On Aug. 21, the company announced that Kalyani Strategic Systems won two new export orders worth Rs 850 crore for the supply of components and armoured vehicle chassis.

Nomura maintains a 'buy' rating on the stock with a price target of Rs 1,157 per share, implying a 10.3% upside potential over the next 12 months.

• Retains 'buy' on defence vertical expansion with a price target of Rs 1,157 per share.

• Brokerage expects the company's total defence orderbook to rise to Rs 3,300–3,400 crore, which management said will have to be executed over the next two years.

• Defence segment of the company is likely witnessing a sharp ramp-up in revenue over FY24–25, according to the brokerage.

• It is developing several new products like vehicles, artillery systems, components, naval solutions and unmanned systems, putting the company on a rapid growth path in defense exports, according to Nomura.

• The Ministry of Defense has given an acceptance of necessity for the procurement of 307 advanced towed artillery gun systems for the army. Nomura estimates this order to be worth Rs 4,500–5,000 crore over the next three years.

• A part of the ATAGS order may come to Bharat Forge in Nomura's view. Bharat Forge has also been granted a licence by the Union government to participate in a potential defence programme in the future for small arms and its ammunition.

• Bharat Forge will record nearly Rs 2,000 crore of incremental revenue per annum from ATAGS for India and defence exports by fiscal 2026. This should more than offset the Street’s concern of any potential weakness in export commercial vehicles.

• Nomura estimates a 20% Ebitda margin for the defence segment in fiscal 2026.

Bharat Forge's stock was trading 2.34% higher at Rs 1,073.7 apiece compared to a 0.13% advance in the benchmark NSE Nifty 50 as of 2:20 p.m. The share price jumped 2.55% intra-day to hit a record high of Rs 1,076 per share.

The stock has risen 22.07% on a year-to-date basis. Total traded volume as of Monday's close stood at 1.2 times its 30-day average. The relative strength index was at 78, implying that the stock maybe overbought.

Out of the 31 analysts tracking Bharat Forge, 22 maintain a 'buy' rating on the stock, two recommend a 'hold' and seven suggest 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential downside of 6.6%.