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  • Company update: Bharat Forge — Sell — TP Rs.600

    Publish date: July 12, 2018

    FY 2018: Annual report analysis

    Bharat Forge has had a successful FY2018: it saw a robust increase in revenues, improvement in the performance of its subsidiaries and a significant increase in net working capital.

    The increase in revenues can be attributed to the high demand for commercial vehicles (Class 8 trucks) in the US and rising global crude prices.

    Key Highlights

    • A 53% yoy increase in export revenues, coupled by 12% yoy growth in the domestic market, resulted in the company’s total gross revenues increase by a healthy 32% you in FY2018.
    • The domestic non-auto segment was fairly subdued —grew at 2% — due to a stunted cement and steel sectors. However, the international non-auto segment grew at a whopping 46% due to strong export.
    • The commercial vehicle business also reported a strong growth of 24% yoy.
    • The passenger vehicle segment increased by 24%.
    • The company’s subsidiaries almost doubled its profit before tax in FY2018. This year’s profit before tax was Rs 277 million against last financial year’s Rs 139 million. The surge in profits was primarily due to CDP Bharat Forge’s performance this year.
    • The company also had a free cash flow of Rs 2.95 billion, which is slightly lower than the previous year.
    • The company’s working capital surged to Rs 3.98 billion due to marked increase in receivables and inventories and an extension of payable days.

    Valuation & Outlook

    We believe the company’s growth momentum will be difficult to maintain due to a high base in export of commercial vehicles and the oil and gas revenues catching up. Furthermore, the company stock valuation remains stretched despite us not changing the FY2020 earnings estimates.

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