key takeaways from a meeting with Bharat Forge management include: BFL's focus on technology and innovation over the last 4-5 years will reflect on business outcomes in the form of a) ramp-up of multiple non-auto business verticals; and b) marketshare gains in the traditional business.
BFL has primarily focused on developing in-house capabilities rather than licensing/partnership arrangements. The former allows unconstrained access to new markets and it is more profitable in the long run.
Non-auto business (24% of consolidated revenues) would continue to ramp-up through new products and sign-ups of marquee customers in the areas of oil & gas, railways, construction and aerospace. New order wins in these areas will likely reflect in FY16 revenues.
BFL intends to scale up the passenger vehicle business in a profitable manner through new business processes. BFL highlighted that talent is a key constraint to growth. The company is targeting a doubling of parent revenues and a 65% increase in consolidated revenues by FY18.
Our FY15E/16E Ebitda and EPS forecasts are R1,300-1,600 crore and R27.4/37 respectively. We maintain our buy rating on the stock with a target price of R655.