Bharat Forge - Q4FY20 First Cut - ICICI Securities

(CMP: Rs. 333; MCap: Rs. 15,503 crore)

Bharat Forge (BFL) reported dismal performance in Q4FY20, with all operational parameters falling short of our estimates.

Q4FY20 Earnings Summary

- Standalone revenues came in at Rs. 881 crore, down 47.2% YoY as against our expectation of Rs. 1,024 crore. Total India revenues stood at Rs. 392 crore (down 44.5% YoY; CV down 56.7%, PV down 19.3%, industrial down 38.4%). BFL informed that in the international business, PV revenues on the automotive side grew by 4% while CV revenues were impacted tracking sharp decline in US Class 8 trucks. Full year FY20 revenues stood at Rs. 4,564 crore, down 30% YoY

- Standalone EBITDA for the quarter stood at Rs. 110 crore, down 78.7% YoY, with attendant EBITDA margins at 12.5%, a 937 bps sequential fall (I-direct estimates: Rs. 216 crore, 21.1%). Negative operating leverage took a major toll on margins, with employee costs and other expenses rising 250 bps and 890 bps respectively QoQ on percentage of sales basis. Gross margins, however, improved by 210 bps sequentially. On full year basis, margins came off by 690 bps YoY to 22.3%

- Reported loss at PAT level stood at Rs. 73.3 crore (I Direct estimate: profit of Rs. 102.4 crore). This compared to Q4FY20 profit of Rs. 299.5 crore. Sharp deterioration in profitability tracked fall in revenues and margins as well as a charge of Rs. 89 crore taken for impairment of investments in an associate (Tevva Motors Jersey) which is a start-up engaged in modular electrification systems for medium duty CVs. Total standalone PAT for FY20 came in at Rs. 473.7 crore, a decline of 56% YoY

- At the consolidated level, the company reported Rs. 21.3 crore as share in loss at subsidiaries/associates. BFL estimates that overseas operations are expected to post cash loss of € 5 million during H1CY20 amid severe drop in demand

- Consolidated CFO generated during the year stood at Rs. 1,522 crore (up from Rs. 911 crore in FY19), while FCF generation stood at Rs. 560 crore

BFL's performance in Q4FY20 was impacted due to high exposure to the domestic as well a global commercial vehicle space. The company however is in constant endeavour to de-risk its business profile through incremental focus on industrial, PV and EV components domain. We would be coming out with a detailed report soon.

Shares of BHARAT FORGE LTD. was last trading in BSE at Rs.337.45 as compared to the previous close of Rs. 318.95. The total number of shares traded during the day was 363916 in over 5741 trades.

The stock hit an intraday high of Rs. 341.65 and intraday low of 319.5. The net turnover during the day was Rs. 120384619.

Source : Equity Bulls

Keywords