Bharat Forge share price extends losses, drops over 19% in two days after Q3 results; Should you buy?
- Bharat Forge reported consolidated net profit of ₹254.45 crore in Q3FY24, a growth of 223% from ₹78.71 crore in the same period last year.
Bharat Forge share price extended decline and fell nearly 6% on Tuesday amid heavy selling pressure on cautious near-term outlook. Bharat Forge shares dropped as much as 5.91% to ₹1,063.40 apiece on the BSE.
On Monday, Bharat Forge stock price plunged over 14% after the forging company reported its December quarter results. In two days, the stock has fallen over 19%.
Bharat Forge reported consolidated net profit of ₹254.45 crore in Q3FY24, a growth of 223% from ₹78.71 crore in the same period last year.
The company’s revenue during the quarter ended December 2023 increased 15.7% to ₹3,922.96 crore from ₹3,389.95 crore in the year-ago quarter.
“Looking ahead in the Q4 & further into FY25, we expect the growth momentum to moderate in both Domestic & Export market across industries,” Bharat Forge said in a release.
Most analysts maintained a bearish outlook on Bharat Forge stock on muted assumptions for near-term performance. Here’s what brokerages have to say:
Kotak Institutional Equities
Bharat Forge’s consolidated EBITDA (excluding forex gain) came in 4% below our estimates due to weaker-than-expected revenue print and profitability in the EU business. Near-term outlook remains challenging on account of slowdown in some of the company’s key segments, said Kotak Institutional Equities.
It expects newer businesses to drive growth over the coming years; however, it believes the stock price is not adequately factoring in EV risks on select core businesses and ramping-up delays in its newer focused business.
The brokerage cut its FY2024-26 consolidated EPS estimates by 1-11% led by lower revenue growth assumptions, lower profitability assumptions for the EU business and higher finance cost assumptions, partly offset by higher EBITDA margin assumptions for the India business.
Valuations remain expensive given the cyclical nature of the business, it said, while maintaining a ‘Sell’ rating with a revised target price of ₹850 per share.
Nuvama Institutional Equities
Factoring in lower growth assumptions, Nuvama Institutional Equities cut FY25E and FY26E EBITDA estimates by 4% and 3%.
“Weakening of European/US economies poses a challenge ahead for core segments such as MHCV and oil & gas. This, coupled with lower domestic MHCV/PV growth, shall lead to moderation in revenue and EBITDA CAGR to 12% and 13% over FY23–26E,” said Nuvama Institutional Equities.
It maintained a ‘Reduce’ rating and cut the target price to ₹1,080 per share from ₹1,140 earlier.
Motilal Oswal Financial Services
While Bharat Forge’s core India business is on the growth path, it is worth noting that the underlying macro environment in the US and EU is showing signs of weakness. However, the newly established businesses incubated over the last 5- 10 years have reached pivotal moments and they have the potential to offset the anticipated challenges in core operations, said Motilal Oswal Financial Services.
The Defense segment is poised for significant growth, with execution already underway. The e-mobility sector presents a substantial opportunity and possesses foundational elements, but the competitive landscape is yet to evolve, the brokerage firm added.
It cut its FY24E and FY25E EPS estimates by 7% and 6% to factor in a weak demand environment, especially in auto exports. The brokerage reiterated a ‘Buy’ call with a target price of ₹1,315 per share.
At 10:50 am, Bharat Forge shares were trading 1.35% lower at ₹1,115.00 apiece on the BSE.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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