Target: ₹1,114
CMP: ₹1,116.05
Bharat Forge Q4-FY25 results in-line to our while there was an operational miss to street estimates by 5-6 per cent. Weak revenues at ₹2,160 crore (-7 per cent y-o-y) was offset by better gross margins at 60.4 per cent (+180bp y-o-y, est 60 per cent). Global and India macro challenges reflected as domestic/exports revenues declined around 14/1 per cent. This we believe is yet not over as uncertainty continues to prevail.
The defence business revenues declined about 15.6 per cent q-o-q at ₹280 crore however, grew around 13.5 per cent in FY25 at ₹1,770 crore with cumulative order book at around ₹9,400 crore as new order addition were healthy at ₹3,420 crore.
The overseas subs performance continued to improve led by US with EBITDA loss at ₹47.1 crore in FY25 at 60-65 per cent utilisation (vs loss of ₹95.30 crore in FY24). While led by macro challenges, EU EBITDA was at ₹95.70 crore in FY25 (vs ₹140 crore in FY24).
To factor in for prevailing macro uncertainty, we cut FY26/27E EPS by about 3 per cent as we continue to expect sharp defence ramp-up and industrials would cushion weakness in auto vertical. The recent correction in the stock largely factors in near-term challenges and do offer decent upside on the stock as our SOTP based TP at ₹1,351 (v/s ₹1,377 earlier).
Published on May 9, 2025
