Shares of some forging manufacturers fell sharply after a fall in orders of North America’s Class 8 trucks. Bharat Forge Ltd’s shares fell about 9% in the last two trading sessions, while those of Motherson Sumi Systems Ltd and Ramkrishna Forgings Ltd also retraced by 5% and 3%, respectively.

All these firms have a significant exposure to manufacturers of Class 8 trucks, which are essentially heavy-duty vehicles. Nearly 20% of Bharat Forge’s standalone revenue and about 12-15% of its consolidated revenue comes from sales to this segment. So is the case with Ramkrishna Forgings. Motherson Sumi’s dependence on this segment is by virtue of its overseas subsidiary, PKC, which commands a high share in the heavy-duty trucks segment.

Alarm bells rang after November data showed a sharp 14% year-on-year decline to 29,700 units in Class 8 order flows in North America. Worse, it was 35% lower when compared to the previous month, and quite unexpected. A Nomura Research report says that the segment had clocked an average of 42,000 units per month in the last 12 months.

In fact, a few weeks ago, Bharat Forge’s management had highlighted that in calendar 2018, the heavy-duty truck segment topped estimates almost every month. Besides, November is normally a high-growth period.

That apart, weak medium and heavy commercial vehicle (CV) sales growth has raised red flags in the domestic market too. After a scorching double-digit pace of growth, CV sales contracted in November for most companies.

So does this imply the beginning of a slowdown for component makers? Year-on-year growth has been robust for almost two years. Is the cycle suddenly turning?

Investors are evidently worried. Little wonder then that shares of some these component makers, whose revenue and profit growth hinges on the Class 8 truck segment, reacted to the news of weaker order flows.

The Nomura report says, “We expect the Class-8 truck cycle to peak out in the first half of FY20 as production normally lags order flows by six to seven months."

This in turn will weigh on valuations and stock prices. Some brokerage firms have already trimmed earnings estimates for these companies for FY20. Unless there is a reversal in sales of CVs in the domestic market and heavy-duty trucks in the US, investor sentiment is likely to remain weak.

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