Bharat Forge - Q1FY21 First Cut - ICICI Securities

(CMP: Rs. 422; MCap: Rs. 19,647 crore)

Bharat Forge (BFL) reported weak performance in Q1FY21, with margin number being below our estimate.

Q1FY21 Earnings Summary

Standalone revenues came in at Rs. 427 crore (down 68.3% YoY, I Direct estimate: Rs. 403 crore), tracking 55.6% YoY decline in volumes to 17,840 MT. Total India revenues stood at Rs. 167.8 crore (down 71.7% YoY; CV down 84.7%, PV down 85.8%, industrial down 51.2%). On the international side, PV revenues de-grew by 52.6% while CV revenues declined 78.9% and industrial revenues fell by 50.7%. Among geographies, the Americas posted 74% revenue decline while the drop was more contained in Europe (down 41%)

Bharat Forge management guided for Q2FY21E domestic revenues being flat YoY, while export revenues are expected to be lower than in the previous year. Domestically, it expects CV demand to contract 30-35% YoY in FY21E, with meaningful recovery seen only in FY22E. US Class 8 truck demand is also expected to remain muted in the near term amid lower economic activity and relatively low age of fleet.

Standalone EBITDA for the quarter stood at negative Rs. 3 crore vs. our expectation of modest Rs. 12 crore profit. Margin performance was likely impacted by inventory adjustment, with gross margins sliding 630 bps QoQ while other expenses declined sequentially on percentage of sales basis.

Reported standalone loss at PAT level stood at Rs. 56.3 crore (I Direct estimate: loss of Rs. 71.4 crore). There was a beat on the profitability front despite miss on margins on account of higher than anticipated other income and lower than anticipated depreciation outgo.

At the consolidated level, the company reported Rs. 1.9 crore as share in loss at subsidiaries/associates, down sharply from loss of Rs. 21.4 crore in the previous quarter - which was a silver lining.

BFL's performance in Q1FY21 was impacted severely by Covid-19 pandemic related lockdowns in domestic as well as global operations. The company, however, continues to focus on lowering breakeven levels in all operations and de-risk business away from CVs. We would be coming out with a detailed report soon.

Shares of BHARAT FORGE LTD. was last trading in BSE at Rs.434.75 as compared to the previous close of Rs. 412.95. The total number of shares traded during the day was 484566 in over 10176 trades.

The stock hit an intraday high of Rs. 442 and intraday low of 407.6. The net turnover during the day was Rs. 207972052.

Source : Equity Bulls

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