Pune-based auto component major Bharat Forge is aiming to double its consolidated revenue to around $3.2 billion in the next 3-4 years, said analysts from InCred Equities after an interaction with the company management. The auto and engineering parts manufacturer is banking on strong growth prospects in the defence and aerospace sectors and with a revival in automobile demand to drive sales growth, said the broker.
Joint MD Amit Kalyani highlighted that the company is targeting to triple sales from its defence and aerospace verticals over the next 3-4 years. He expects contribution from defence and aerospace to touch $100 million during this period.
Currently, Bharat Forge has a consolidated topline of $1.6 billion, with around 40% contribution coming from the domestic automobile market, especially commercial vehicles. The company expects domestic automobile demand to sustain its comeback as investment cycle picks up pace.
Kalyani stressed that the China+1 strategy by global manufacturing firms presents a huge opportunity for the Indian capital goods and auto component sectors. He sees tailwinds from the rush to find alternatives to China and Russia amid changing geopolitical situation. This is opening up export markets for Indian manufacturing firms.
On these lines, Bharat Forge sees major growth potential in the aluminium castings business, as Europe looks to diversify its source of castings imports worth $14 billion currently dominated by China. The company’s upcoming alloy steel plant will help it expand product range for the aerospace industry.
Bharat Forge is also upbeat on the electric vehicle components business, expecting it to make up 6-8% of total sales in next 3-4 years as new EV projects get commissioned. The company aims to focus on developing high-value defence products with medium volumes, completely indigenous technology.
On the inorganic growth front, Bharat Forge sees opportunities to acquire smaller auto component firms that are looking for merger rather than private equity investors. It will be selective on global acquisitions focused on technology for defence and EVs.
The positive growth outlook comes on the back of Bharat Forge’s strong financial performance in recent years, with consolidated net profit rising 86% year-on-year to Rs 1,138 crore in FY22.
Bharat Forge currently trades at 13-year high P/E multiple of 50 times FY23 estimated earnings, reflecting strong investor confidence in its growth prospects.
Other brokerages including Emkay Global and Sharekhan also have Buy ratings on Bharat Forge, underlining the positive industry tailwinds given import substitution andChina+1 play. Its growing defence, aerospace portfolio are key monitorsable, according to analysts.