Bharat Forge continued its northward journey on Wednesday.
The stock of the steel forgings major was up by 2.8% at Rs 273 on the BSE in late-afternoon trades. Earlier in the session, it hit a high of Rs 273.75. 28,000 shares changed hands on the counter.
Auto analysts said the Bharat Forge stock is witnessing renewed buying support, getting re-rated in the process. The company announced strong Q3 results in late January 2003 and also bagged an order from China, which has boosted the stock further. From a recent low of Rs 227.20 on 29 January 2003, the stock has surged by 20% in just a few sessions to the current Rs 273.
Value-added machined component exports, reduction in the company's debt, and the global trend of outsourcing has led to analysts turning bullish on the BFL stock.
"A P/E expansion for the stock looks very much a strong possibility, since there is hardly any worthwhile competitor for BFL in the domestic market. Globally, BFL is one of the most cost competitive forging players, which is evident from the recent ramp-up witnessed in export orders bagged not only from China, but also from established automotive players within the European and US markets," stated an auto analyst with a local brokerage, in the Q3 earnings update for the stock.
Analysts forecast a strong growth in BFL's earnings in FY 2003 and FY 2004. A domestic brokerage expects BFL to report a net turnover of Rs 612.64 crore (Rs 6.12 billion) and a profit after tax of Rs 75.40 crores, with annualised earnings estimated at Rs 20.01 for FY 2003.
BFL's financial performance for Q3 has been robust. While sales rose by 46% to Rs 180.54 crore (Rs 1.8 billion) in Q3 ended 31 December 2002, PAT jumped by 239% to Rs 21.36 crore. The driving force has been exports, where prices and payment terms are significantly better than those in the domestic market. For the quarter, the company recorded export revenues of Rs 74.68 crore, an increase of 154.3% over the corresponding period of the previous year. Sequentially, exports have grown by 4.3%. The company recorded domestic revenues of Rs 105.86 crore (Rs 1.05 billion), an increase of 12.4% over the corresponding period of the previous year.
For the nine months ended 31 December 2002, BFL's sales were higher by 39% to Rs 480.29 crore (Rs 4.8 billion) and operating margin improved from 22.7% to 28.0%. Thus, operating profit was higher by 71% at Rs 134.71 crore (Rs 1.34 billion). PAT jumped by 296% to Rs 51.08 crore.
Last month, BFL secured a second large customer in China. Guangxi Yuchai Machinery Company, a part of the Second Auto Works, is among the largest auto firms in that country. BFL has signed a long-term contract with the company for the supply of engine components. The financial effect of this order will be seen in the second quarter of FY 2003-04.
BFL has the world's largest forging facility 1,02,000 tonnes - at a single location.
BSE code: 500493