X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Bharat Forge: Poised for higher growth - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Bharat Forge: Poised for higher growth

Dec 15, 2003

Bharat Forge, one of the largest forging companies in the world, was in the news recently on account of the company's acquisition of a German forging company, Carl Den Peddinghaus GmbH. In this article, let us have a look at what this acquisition means for the company and also consider the other plans of the company.Let us have a look at the profile of the company that Bharat Forge acquired:

Carl Den Peddinghaus GmbH (CDP), a blue chip German manufacturing company, is one of the largest forging companies in the world and had recorded sales of Euro 116 m for the year ended December 31, 2002. The company is a major supplier of critical chassis components and has such prestigious automakers as BMW, Volkswagen, Audi, Daimler Chrysler and Volvo as its clients.

The acquisition of CDP fits perfectly into Bharat Forge's long-term strategy of diversifying its geographical footprints. As can be seen in the above graph, in FY02, the US markets accounted for close to 70% of the company's total export earnings, thus making it vulnerable to adverse events of the US markets. However, in FY03, the contribution reduced to under 50% on account of the company bagging a five year contract for supplying engine components to a Chinese automobile OEM and this resulted in the Chinese market contributing 23% to the company's total exports.

In the same period, the contribution from the European markets has remained almost stagnant. However, post the current acquisition, the scenario is likely to change and along with the US and China, the European markets are also likely to contribute significantly to the company's exports.

Also, Bharat Forge was exposed to the risk of being over-dependent on a single overseas segment, the US heavy truck manufacturing industry. The company realised this and tried to venture in the other segments of the automobile industry such as passenger cars and utility vehicles. This effort of the company has borne fruit as global car makers like Ford and Daimler Chrysler have recently chosen the company as a supplier of components for their global passenger car programs. Therefore, on account of these multi year contracts, the company has not only reduced its dependence on one segment, it also stands to benefit from the high growth potential of the passenger car industry.

The debt to equity ratio of the company has also come down from 2.2 in FY02 to 1.3 in FY03. However, we believe that the ratio is likely to go up as the company has decided to raise long-term funds to the tune of Rs 3.5 bn. Nothing concrete can be commented upon about the fund raising exercise as yet, as the company is yet to decide on the structure for the same.

The stock currently trades at Rs 725, implying a P/E of 24.5x its annualised 1HFY04 earnings. Post the acquisition, the company has become the second largest forging company in the world and has given it an access to the lucrative European markets. Further, the growth in the domestic markets is also likely to be strong on account of good macroeconomic indicators. Thus, we are of the view that the going forward, the company should be able to justify its current valuations.


Equitymaster requests your view! Post a comment on "Bharat Forge: Poised for higher growth". Click here!

  

More Views on News

BHARAT FORGE Announces Quarterly Results (4QFY19); Net Profit Up 198.5% (Quarterly Result Update)

May 24, 2019 | Updated on May 24, 2019

For the quarter ended March 2019, BHARAT FORGE has posted a net profit of Rs 3 bn (up 198.5% YoY). Sales on the other hand came in at Rs 17 bn (up 13.8% YoY). Read on for a complete analysis of BHARAT FORGE's quarterly results.

BHARAT FORGE Announces Quarterly Results (3QFY19); Net Profit Up 35.8% (Quarterly Result Update)

Feb 18, 2019 | Updated on Feb 18, 2019

For the quarter ended December 2018, BHARAT FORGE has posted a net profit of Rs 3 bn (up 35.8% YoY). Sales on the other hand came in at Rs 17 bn (up 21.7% YoY). Read on for a complete analysis of BHARAT FORGE's quarterly results.

Sandhar Technologies IPO: Worth Betting on This Automotive Component Manufacturer? (IPO)

Mar 17, 2018

Should you subscribe to the IPO of Sandhar Technologies Ltd?

More Views on News

Most Popular

My Top 7 Stocks to Profit from Sensex 100,000(The 5 Minute Wrapup)

May 16, 2019

Tanushree Banerjee explains everything you need to know about the Rebirth of India and Sensex 100,000.

3 Stocks to Bet on to Become a 'Dividend Millionaire'(Profit Hunter)

May 14, 2019

As markets continue to rattle amid earning season, upcoming elections, volatile crude price and US China trade war, it's a great idea to add some stability to your portfolio by adding dividend stocks.

Indian Steel: The Perfect Multibagger Opportunity(Profit Hunter)

May 17, 2019

A structurally strong Indian Steel Industry will help India achieve 8%+ GDP growth in the coming years.

My Top 7 Stocks to Buy as Modi Returns to Power(The 5 Minute Wrapup)

May 23, 2019

The Modi government is all set to come back to power. With a stable government at the centre, how should you play the stock market?

What Makes TVS Srichakra and CCL Products a Cut Above the Rest?(The 5 Minute Wrapup)

May 17, 2019

Despite the commodity nature of their businesses, these two stocks have rewarded shareholders well.

More

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms

BHARAT FORGE SHARE PRICE


May 27, 2019 02:25 PM

TRACK BHARAT FORGE

  • Track your investment in BHARAT FORGE with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

BHARAT FORGE - NRB BEARINGS COMPARISON

COMPARE BHARAT FORGE WITH

MARKET STATS