Bharat Forge shares hit fresh 52-week high. Should you buy?

Leading manufacturer of Class 8 trucks, Bharat Forge shares hit a new 52-week high on Tuesday as analysts turn bullish on the company going forward. In an analysts' meeting, the top management of the company stated a healthy growth outlook across segments by leveraging its investments in diversified businesses. The company aims to become a key player in the core components space alongside expanding its presence in the industrial, electric, and aerospace segments. So far in the day, Bharat Forge shares have jumped nearly 9%. Experts have recommended buying the stock with a target price crossing the ₹1,000 mark.

At around 2.31 pm, Bharat Forge is trading at ₹888.85 apiece up by 2.35% on BSE. The company's market cap is around ₹41,376.06 crore. Earlier in the day, the company's stock hit a new 1-year high of ₹41,376.06 apiece. Year-to-date, Bharat Forge shares have skyrocketed nearly 27% on Dalal Street.

The company manufactures an extensive array of critical and safety components for several sectors including Automobiles (across Commercial & Passenger Vehicle), Oil & Gas, Aerospace, Locomotives, Marine, Energy (across renewable and non-renewable sources), Construction, Mining, and General Engineering.

Mansi Lall – Research Analyst, Prabhudas Lilladher in a note said, "We attended Bharat Forge’s analyst meet, hosted at their Kalyani Centre for Technology & Innovation (KCTI) Pune. Management cited a healthy growth outlook across segments by leveraging its investments in diversified businesses. Over the past few years, the company has redirected its focus from its traditional core business (forging components) to multiple opportunities present in segments like defense, aerospace, e-mobility, casting, light-weighting, and industrial."

Lall's note highlighted that over 2020-2030, Bharat Forge aspires to be a key player in the core components space along with expansion in industrial, electric, and aerospace segments. Accordingly, a target of 12-15% revenue CAGR and 20%+ consol EBITDAM (19.3% in FY22) has been set for FY2030.

Prabhudas Lilladher research analyst remains positive on Bharat Forge led by (1) multiple growth levers in the domestic & export automotive segment with cyclical turnaround in the CV industry and easing of chip shortage going ahead, (2) strong double-digit growth in high margin non-auto business (3) rising traction in E-mobility segment and (4) potential revenue contribution from defense & renewable segment.

She added in the note, "maintain ‘BUY’ with a target price of ₹1,005 at 28x standalone EPS ( ₹950 earlier) as we roll forward to Dec-24E."

Further, after the analyst meeting, ICICI Direct in a report said, in terms of financial/growth ambitions of Vision 2030, key targets by FY30 include: (i) 12-15% revenue CAGR, (ii) EBITDA margin >20% at consolidated level, (iii) RoCE at 25% at a consolidated level, up 500 bps from FY22 levels, (iv) capital allocation for organic/inorganic growth, dividend payout at 30%+.

Further, ICICI Direct's note added, the company's capabilities in defence space need special mention wherein it has indigenously developed armored vehicles, ATAG guns (successfully tested, ready for induction in Indian Army, order anticipated anytime soon), bullet shell casing, etc, with IP rights staying with BFL and opportunity size in this space pegged at thousands of crores in the next decade.

On the valuation, ICICI Direct's note said, "we retain BUY amid BFL’s capabilities in auto, non-auto space with growth opportunities that lies ahead in defence, aerospace & e-mobility domains," adding, "incorporating FY25E and rolling over our valuations, we now value BFL at ₹1,050 i.e. 33x P/E on FY24-25E average EPS of ₹31.7/share."