Mumbai: Bharat Forge, the world’s second biggest forgings maker, is expected to report a huge jump in April-June net profit helped by a lower base last year and rising sales.
Hurt by the slowdown that engulfed the global auto industry last year, Bharat Forge had reported a meagre net profit of Rs9.6 million on sales of Rs3.5 billion in the first quarter of FY10.
A Reuters poll of brokerages expects Bharat Forge to post a net profit of Rs561 million in April-June on a likely rise in sales to Rs5.99 billion.
“It’s the base effect,” said Vaishali Jajoo, analyst at Angel Broking, explaining the likely surge in Bharat Forge’s profits.
“Many commercial vehicle companies are showing that kind of trend. For Bharat Forge 70-75% of revenues (domestically) come from commercial vehicles. Also, the operating profit margins improved for the company,” Jajoo said.
Bharat Forge, which has benefited hugely from the buoyancy in India’s commercial vehicles sector, is one of the largest and most favoured stocks in the $20-billion auto components sector.
Fourteen out of 18 analysts covering Bharat Forge have a ‘buy’ or ‘strong buy´ rating on the stock, according to Thomson Reuters estimates.
Auto-component makers are expected to report a strong performance this quarter, analysts said.
Earlier this week, Exide Industries, India’s top auto battery maker, reported a 35% rise in first quarter profit beating analysts’ expectations, aided by a revival in domestic auto volumes.
Car sales in India rose an annual 30.8% in June, as a rapidly expanding economy continues to pull buyers to showrooms. They are expected to rise 12-13% in 2010-11, according to the Society of Indian Automobile Manufacturers.
Sales of trucks and buses rose 44% in June to 52,211 units. In May commercial vehicle sales were up 58%.
Bharat Forge, which counts top global and Indian auto makers among its clients, gets around 80% of its sales from the automotive business. It aims to raise its higher-margin non-automotive share to 40% by FY12.
“A strong topline coupled with a better product mix should augur well,” for Bharat Forge, said Surjit Arora, analyst at Prabhudas Lilladher.
The firm, which has a joint venture pact with French nuclear power major Areva, had in June raised around $134 million through a sale of securities to expand non-auto capacity.
Arora expects the firm’s quarterly Ebitda (earnings before interest, tax, depreciation and amortisation) margins to expand by almost 450 basis points from a year ago to 25.4%.
Bharat Forge shares, valued at $1.6 billion, has risen over 14% in April-June, compared with a 5.5% rise in the midcap CNX Index.