Bharat Forge records eighth consecutive quarter of strong growth

Bharat Forge has announced its results for the third quarter of FY2019, marking the eighth consecutive quarter of robust revenue and profit growth on back of strong performance across key verticals and all geographies.

According to Baba N Kalyani, chairman and managing director, “Total revenue at Rs 16,925 million grew by 21.7 percent compared to Q3 FY18. Despite increase in raw material prices and energy cost, EBITDA margins at 28.8 percent, continued to be within the guided range. Key highlights during the quarter include record quarterly revenues from the oil and gas vertical and the aerospace and defence vertical. The company also secured new orders worth US$ 6.5 million from the commercial vehicle and industrial sector.

“The new facilities at Baramati and Nellore are nearing completion and should commence commercial production in the next two quarters, providing the impetus for organic growth going forward. Our investments in research and innovation, strong domain knowledge and a robust order pipeline provides a strong platform for the company to outperform underlying market going forward. ROCE (Net of Cash) has witnessed sharp improvement to 24.8% despite significant investment in new capacity creation and strategic initiatives focused on e-mobility.

Looking ahead into the next quarter, we expect to see demand sustaining at current levels. The domestic CV sector is witnessing some softness in demand because of de-stocking and we expect it to become normal in the next few months.”

As per an analyst report, Bharat Forge, like other companies in the field, has been affected by the slowdown in M&HCV sales. Tightening credit environment, revision in axle load norms and sharp increase in fuel prices along with subdued freight rates have impacted demand for the last couple of months. Though demand sentiments are expected to remain weak in the near term, easing of liquidity pressures and potential pre-buying ahead of the impending implementation of BS-VI emission norms (from April 2020 onwards) supports a positive outlook for FY 2020. BFL’s M&HCV revenues stood at Rs 2,695 million in Q3 FY 2019. In the PV segment, the company continues to focus on new product development to increase its product portfolio and market share. Revenues from the segment have grown by 9 percent as compared to the same period last year. With revenues of Rs 2,690 million, the industrial segment has shown a growth of 32 percent in Q3 FY 2019. Growth was driven by all sectors, defence and agri being the major contributors.

International Business in CY2018 was a strong year for the North American Class 8 market as truck orders recorded their highest numbers in more than a decade supported by strong economic activity and strong freight market. CY2019 outlook for the North American truck market looks positive supported by a high backlog of over 300,000 units coupled with high freight demand. Order activity has reduced in the past couple of months but with a strong backlog and a solid book build schedule, the drop in orders is in line with expectations. With only a few build slots remaining for 2019, orders are expected to remain muted and reach normalised levels over the next couple of months. Demand in the European truck market continued to remain healthy on account of higher freight utilization and freight operator profitability. Market demand is expected to remain stable going forward.

To bring about a structural and sustainable improvement in the operational performance of the overseas subsidiaries, there is lot of impetus and focus on Al forgings and productivity improvement. The investments and the actions which are being undertaken should have the desired effect, says the analyst report.