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Bharat Forge Ltd: Subdued Performance, Recovery on Cards? - Views on News from Equitymaster
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  • Nov 22, 2016 - Bharat Forge Ltd: Subdued Performance, Recovery on Cards?

Bharat Forge Ltd: Subdued Performance, Recovery on Cards?
Nov 22, 2016

Bharat Forge has announced its financial results for the second quarter of the financial year 2016-17 (2QFY17). During the quarter, revenues declined by 20.1% YoY and net profits declined by 26.3%.

Performance summary
  • For 2QFY17, net sales were down by 20.1% YoY, the decline was largely driven by the pressure in the overseas markets. Volume and realisations both were down by 15.3% YoY and 6.1% respectively.
  • The domestic business declined by 6% YoY, whereas the exports business saw a stark decline and was down 30%.
  • The subdued results were due to the continued slowdown both in the domestic and exports markets.
  • In the domestic market, the M&HCV industry de-grew by 17% YoY. The decline has offset a promising growth of 11.7% in the passenger vehicles.
  • On the exports front, all the markets showed sluggish demand. US business de-grew by 43% YoY, this was on the back of headwinds in the industrial business.
  • Operating profits for the quarters declined by 22.7% YoY with margins contracting by 90bps to 26.5%. The impact on the operating profits have been lower because of the cost control measures (other expenses down by 24.7% YoY) taken by the management and subdued raw material cost (down 24% YoY).
  • Net profits declined by 26.3% YoY with margins contracting by 115bps to 13.6%.
  • During the first half of the financial year 2016-17 (1HFY17), top-line declined by 19.7% YoY and net profits declined by 32.4%.

    Financial Performance Snapshot
    (Rs m) 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Net sales 11,710 9,359 -20.1% 23,570 18,929 -19.7%
    Expenditure 8,505 6,882 -19.1% 16,800 14,009 -16.6%
    Operating profit (EBDITA) 3,204 2,477 -22.7% 6,770 4,921 -27.3%
    EBDITA margin (%) 27.4% 26.5% -90.23 28.7% 26.0% -272.79
    Other income 282 309 9.7% 581 566 -2.6%
    Depreciation 714 726 1.7% 1,462 1,466 0.2%
    Interest 222 189 -14.8% 435 360 -17.4%
    Profit before tax 2,550 1,870 -26.7% 5,453 3,661 -32.9%
    Exceptional item 0 0 0 0
    Tax 827 601 -27.3% 1,771 1,172 -33.9%
    Profit after tax / (loss) 1,723 1,269 -26.3% 3,682 2,490 -32.4%
    Net profit margin (%) 14.7% 13.6% -115.4 15.6% 13.2%
    No. of shares (m) 232.8
    Diluted earnings per share (Rs)* 24.9
    Price to earnings ratio (x)* 34.9

    (*Trailing twelve-month earnings)

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