Mumbai: Bharat Forge Ltd on Friday reported a sharp drop in first-quarter profit from a year ago, but shares jumped on hopes higher sales and margins from the March-quarter is a signal the firm has turned the corner.
The world’s second largest forgings maker reported a standalone net profit of Rs9.6 million from Rs265.6 million a year ago, as sales almost halved to Rs3.5 billion from Rs6.37 billion.
But sales rose over 20% from January-March, while operating margins widened to 22% from 18.9%, spurring optimism among analysts and traders.
“Though year-on-year their numbers may continue to fall for the next two-three quarters, their performance is improving,” said Vaishali Jajoo, analyst at Angel Broking.
“They have grown both on domestic and export front sequentially, that is boosting sentiments as some core business is reviving,” Jajoo said.
Exports grew 19.7% sequentially to reach Rs1.42 billion. It dropped 52% on year.
“Sequentially although production was up only 21%, revenues were higher, exports were higher and EBITDA has improved both in terms of margins and absolutes,” Amit Kalyani, executive director, told the agency over the telephone.
“Basically it’s a combination of cost compression, focus on new products and non-automotives starting to pay off,” he added.
The firm is also betting heavily on its non automotive segment which contributed 32% of total sales this quarter.
“If you look at the kind of products we are talking about, high end products going into energy sector etc, then realization per tonne is higher than the automotive side,” Kalyani said.
He said the firm is expecting this division’s contribution to rise to more than 40% to revenues by FY12. The non-automotive business segment makes components for aerospace, construction, mining, marine diesel and power.
“The company itself has said the outlook is changing for the positive. They have seen some volume pick-up, domestic and globally sequentially,” an analyst at a local brokerage told the agency.
“Right now they are at the bottom of the cycle, but we are seeing slight recovery. In these firms even if we see some signs of a recovery it is taken as a big positive,” the analyst said, explaining the positive share movement.
Bharat Forge shares which rose as much as 9.7% following the results, were trading up 6.65% at Rs169.90 in the Mumbai market.