Bharat Forge (BFL) is the world’s largest forging companies with presence across automotive, power, oil & gas (O&G), construction & mining, rail, marine and aerospace industries. However, during the past 12-15 months, BFL’s business has taken a beating triggered by slowdown in its key user industries—US Class 8 truck market, O&G and construction & equipment.
But, post the gloomy milieu, things are gradually turning around—US Class 8 truck market has shown signs of recovery, the
number of rigs has improved since August 2016 brightening prospects of the company’s O&G business, etc.
You might also want to see this:
Moreover, we anticipate exponential growth in BFL’s PV business riding on expanding & innovative product portfolio and new client acquisition.
Lower capex requirement complemented by surging demand is bound to boost fixed asset turnover ratio and RoCE over the next 2 years.
Hence, we recommend ‘buy’ as we believe the current price factors in the constraints the company has faced in FY16 and we perceive significant upside going ahead.