Bharat Forge - Defense To Remain Growth Driver: Motilal Oswal

Motilal Oswal Report

We met Bharat Forge Ltd.’s management team recently to understand the company’s growth outlook in the coming years. Key growth drivers for Bharat Forge would be:

1. the robust order backlog of Rs 54 billion in defense exports to be executable over the next three years, along with the prospects of the beginning of domestic defense orders soon;

2. with new order wins and multiple initiatives, JS Autocast is likely to emerge as one of the fastest growing businesses of Bharat Forge;

3. the aerospace segment is set to clock strong growth in the coming years;

4. Passenger vehicle exports are likely to moderate in FY25E, but they should pick up from FY26 onward given a healthy order backlog. However, commercial vehicles (both domestic and exports) and domestic PVs are likely to see weak growth.

Given the weakness in Europe, the turnaround in overseas subsidiaries may happen with a lag of a couple of quarters. We estimate a CAGR of 13%/26%/54% in consolidated revenue/Ebitda/PAT over FY24-26. However, at 45.5 times/34 times FY25E/FY26E PER, we believe the current valuation fully prices in the positive factors. We remain Neutral with a revised target price of Rs 1,470 (based on 30 times Sep’26E consolidated EPS).

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