Bharat Forge: Exports drive sales growth in Q4

Operating margins up 520 bps on rich product mix, higher utilisation

Bharat Forge appears to be on course to become a ~7,000-crore company by FY18. Even as standalone net sales are marginally below the Street's estimates, the company remains optimistic about FY16, as it expects demand to be robust across its key markets.

The company’s net sales grew 32 per cent over a year to ~1,195 crore, marginally less than the Street's estimated ~1,252 crore. Standalone net income (including other operating income) grew 31.5 per cent over a year to ~1,223 crore. The company’s operating income grew 58 per cent to ~367 crore. The margins improved 520 basis points over a year to 30.5 per cent, driven by a rich product mix and higher utilisation. Net profit grew 71 per cent over a year to ~203 crore.

Though demand in Europe was muted and the weakness in the euro impacted the company, Bharat Forge is seeing a strong uptick in demand across regions for its automotive and non-auto products. Revenue growth in the quarter was driven by the 45 per cent growth in export revenue and 16 per cent in domestic sales. Exports to Americas grew 68 per cent ~490 crore, compared to a year ago, while Europe grew 22 per cent to ~214 crore. India grew 15 per cent to ~485 crore.

The passenger car market in India grew for the first time in three years, with total production increasing 3.4 per cent.

The company is also seeing double- digit growth in its industrial segment, which grew 11.2 per cent in FY15 on the back of rising demand from the energy sector.

In a conference call, Bharat Forge’s executive director Amit Kalyani conveyed to analysts the company was on track to achieve ~7,000 crore in sales by FY18. Karvy Stock Broking believes Bharat Forge would continue double-digit growth in the US, on account of incremental volumes from the passenger vehicle segment, client addition in the truck segment and penetration into the new non-auto segment. The non-auto segment now accounts for 46 per cent of its business.

Revenues in FY16 will be driven by passenger car, commercial vehicles and non auto business — exports. The company is also expecting opportunities to emerge from the Make in India programme.

Bharat Forge is seeing opportunity in railways, metals and mining, and power and energy. More orders should materialise in the hydro-power and defence segments.