Bharat Forge Q2 Review - Below Our Estimate; Performance Hurt By Cost Inflation, One-Time Cost: Motilal Oswal

Motilal Oswal Report

Bharat Forge Ltd.’s Q2 FY23 standalone performance was a miss due to a one-time cost in the defense business and cost inflation. While all its core businesses are seeing a sharp cyclical recovery, its initiatives to diversify into aluminum, light-weighting, and electric vehicle components have started to fructify.

FY23 will be the first year to clock a contribution from the recently acquired businesses as well as from new aluminum forging capacities in the Europe and U.S.

We have lowered our FY23 consolidated earnings per share estimate by ~19% to factor in:

1. consolidation of Sanghvi Forgings and JS Autocast (positive contribution) and the 10,000 tonne aluminum plant in the U.S. (losses in its first year of operation), and

2. cost inflation and a one-time charge in the standalone business.

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