Bharat Forge touches 52-week high

Bharat Forge is going from strength to strength on expectations that the future holds even better prospects for the company.

The scrip of the forgings major touched its 52-week high of Rs 313 in morning trades. But eased slightly to Rs 311.60, up 8.46% (over its yesterday's close) by 10:40 IST. A total of 36,074 Bharat Forge shares changed hands on BSE till then. The scrip has now risen 25% from Rs 249.05 on 29 April 2003.

The rise in Bharat Forge manifests on hopes that the company may continue to show strong future growth. In fact, operators are believed to be very active in auto ancillary stocks following reports that the sector may witness a growth of 40-45% in the next few years. Global original equipment manufactures, are expected procure components worth $15 billion from India by 2010.

Analysts say the potential is huge for the auto components sector following the slowdown in the global economy what with global players cutting down costs. India with its low pricing and good quality could emerge as the outsourcing hub as a result.

Earlier this month, BFL said its Q4 ended 31 March 2003 net profit stood at Rs 30.01 crore on total income of Rs 198.67 crore (Rs 1.98 billion). For the year ended 31 March 2003, the company's net profit was Rs 81.09 crore on total income of Rs 643.86 crore (Rs 6.43 billion). The company's board recommended a dividend of 60% (Rs 6 per share on a face value of Rs 10 per share) for FY 2002-03.

Analysts seem to be pleased with the results and are also optimistic about the company's future. However, margins are expected to remain under pressure following price competition in the domestic market, which accounts for 60% of the company's revenues. Analysts expect the company to record a rise of 34% in net profit to Rs 108 crore (Rs 1.08 billion) for the financial year ending 31 March 2004.

The company finds itself backed up by a healthy order book position as well as an increasing focus on the export market. It is also planning to tap the international car segment for the first time, which will help its volumes increase manifold.

BFL is the flagship company of the Kalyani Group. It is the largest forgings company in Asia and one of the three largest and most technologically advanced commercial forge shops in the world. The company manufactures a wide range of forgings and machined components for the automotive, diesel engine, railway, earthmoving, cement, sugar, steel, coal, shipbuilding and oilfield industries as also general engineering equipment.

Its product range includes finished machined crankshafts, sub-assembly of industrial machinery, axle beams, steering knuckles, connecting rods, automotive engine and suspension components, etc. It is the number one axle component manufacturer in the world (25% world market share) and the number two engine component manufacturer in the world. Engine and axle components together account for 80% of the company's total sales.

The company's domestic clients include large OEM players like Ashok Leyland, Telco, Mahindra, Eicher, Escorts, Maruti Udyog, Bajaj Auto, Cummins, BEML, etc. Its export clients include Meritor Automotive, First Auro Works, Dana Corporation, Mercedes Benz, New Holland Ford, Mitsubishi Motor Corporation, Volvo Trucks, Lister-Petter, Dirona, Renault, Toyota, Daimler Chrysler, Spicer, Sang Motors, Caterpillar-Perkins, Isuzu and Macimex.

Over the years, BFL has created world class capacities and capabilities. It is the second company in the world to have two 16,000 MT forging lines with an installed capacity of 102,900 MT per annum. It possesses the largest single location commercial forging facility in the world.

As on 31 March 2003, the promoters' holding in the company was 37.26%, while the public and institutions held 22.63% and 24.80%, respectively.

BSE code: 500497