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    BJP 73
    RLM 3
    OTH 24
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    BJP 109
    BSP 2
    OTH 5
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    JCC 7
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* Total Tally Reflects Leads + Wins

Shares of Bharat Forge plunge as truck sales decline in US

By: | Published: December 6, 2018 3:32 AM

During the September quarter, revenue from the sale to the commercial vehicle segment for Bharat Forge was up 33% year-on-year.

The brokerage believes that there are opportunities for Bharat Forge in the auto segment as the country’s transition from BS IV to BS VI fuel apart from electric and hybrid vehicles will require more aluminum components.

A fall in sales of heavy trucks in the US coupled with a slowdown in the Indian commercial vehicle segment in November weighed on the shares of Bharat Forge on Wednesday as the counter lost 8.45% during the day to close at its lowest level since June 20, 2017.
The stock of the axle-making company fell 10% during the course of trade on Wednesday, lowest since November 2016, eventually finishing the day at `531.95 apiece on Wednesday.

According to reports, sales of North America Class 8 trucks fell 36% sequentially in November and 15% on a year-on-year basis. The company, however, in its post September quarter result conference call has guided for a 28% volume growth in this heavy trucks segment in calendar year 2018. It also expects calendar year 2019 to remain strong. During the September quarter, the revenue from exports to North America increased by 39% year-on-year and that to Europe by 32%.
Kotak Securities in report analysing the September quarter result, however, had cautioned that “… truck businesses are cyclical in nature, thus we find valuations expensive”.

The other factor to affect the company is the subdued domestic market. Top two commercial vehicle manufacturers — Tata Motors (TML) and Ashok Leyland — witnessed decline in despatches to dealerships reflecting crunch in the financial markets. While domestic sales of commercial vehicles at TML were down over 5% year-on-year in November, Chennai-based Ashok Leyland reported close to 10% decline during the quarter. The two companies command nearly two-third of the domestic market share.

During the September quarter, revenue from the sale to the commercial vehicle segment for Bharat Forge was up 33% year-on-year.

Even brokerages such as ICICI Securities in its estimates for FY19 have factored in a stronger growth in the domestic market. The brokerage believes that there are opportunities for Bharat Forge in the auto segment as the country’s transition from BS IV to BS VI fuel apart from electric and hybrid vehicles will require more aluminum components.

The company in the September quarter witnessed a 33.5% year-on-year growth in revenue to `16,800 crore whereas its Ebitda grew 25% to `4,800 crore.
The shares of the company, however, fell 23.8% in the last 52 weeks, under-performing the benchmark Sensex which has increased 9.3% during the period.

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