Bharat Forge - Company Update - Dec 24, 2020 - ICICI Direct

Bharat Forge (BFL) has notified that its German subsidiaries (Bharat Forge Aluminiumtechnik GmbH, Bharat Forge CDP GmbH and Bharat Forge Global Holding GmbH) have reached a settlement with the German competition regulator for potential unfair trade practices in 2004-18. BFL's German subsidiaries are required to pay in aggregate €32 million (~Rs. 300 crore) as settlement charges over the next five years. The said judgement comes as a negative surprise. As per our estimates, this could potentially hit the company's P&L in a gradual manner over the next five years.

Valuation & Outlook

Given the total quantum of penalty that is to the tune of €32 million (~Rs. 300 crore), we expect the payout quantum to be progressively gradual in nature. We assume an exceptional charge of Rs. 30 crore, Rs. 60 crore, Rs. 70 crore for FY21E, FY22E, FY23E, respectively. It will lead to a downward revision in our earnings estimates by ~10% in FY22E & ~7% in FY23E. Keeping the same valuation multiples i.e. 30x P/E on FY23E revised EPS of Rs. 17, we assign a revised target price of Rs. 510 on Bharat Forge (from Rs. 550 earlier) and maintain our HOLD rating on the stock.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_BharatForge_CoUpdate_Dec20.pdf

Shares of BHARAT FORGE LTD. was last trading in BSE at Rs.523 as compared to the previous close of Rs. 538.85. The total number of shares traded during the day was 148251 in over 5246 trades.

The stock hit an intraday high of Rs. 540.5 and intraday low of 510. The net turnover during the day was Rs. 78459608.

Source : Equity Bulls

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