India Forge Rating – Decrease: Numbers were 6 less than expected

BHFC Q4FY22 Ebitda reported Rs 4.3 billion, our estimate is 3% lower due to RM headwind. We expect strong growth for the company, led by (i) recovery in the domestic CV segment, (ii) strong order wins including the defense segment and (iii) market share gains in the PV segment. However, we expect margin pressures to continue. Given> 50% of the revenue comes from the cyclical department, we are waiting for a good entry point with this name. Upgrade to a recent price correction.

Individual Ebitda 3% below our estimate: Q4FY22 Individual Ebitda (including Forex profit) of Rs 4.3 billion is 3% lower than our estimate due to RM pressure. Individual revenue increased by 5% qoq which led to (i) 1% qoq decrease in internal revenue and (ii) 9% qoq increase in export earnings. Individual revenue was 2% higher than our estimate due to slightly better performance of exports and domestic trade. The tonnage volume increased by 8% qoq while the average collection decreased by 3% qoq.

U.S. export earnings rose 9% qoq due to a recovery in the number of U.S. Class 8 truck production amid supply challenges. Domestic revenue fell 1% qoq mainly due to the sharp decline in the domestic non-auto business, partly offset by strong growth in the M&HCV segment. Individual Ebitda margin stands at 25.8% (+30 bps qoq), 110 bps lower than our estimate due to RM inflation. Adjusted PAT came in at Rs 2.6 billion, less than our estimate of 3%. Financial costs have risen sharply due to the devaluation of the INR.

Strong orders win across segments to drive growth; However, margins will remain under pressure: we expect strong revenue growth in FY2023-24e leading to (i) strong order wins across automotive and industrial applications (new orders worth Rs 10 billion), (ii) recovery in the domestic CV segment, (iii) ) Gain market share in the domestic PV segment led by new product launches and (iv) win expected orders for artillery guns in the defense sector. However, we believe that margin pressures will be accompanied by continued inflationary pressures as well as improved freight and fuel costs.

Reduce our FY2023-24e consolidated EPS estimate 1-11%: We have reduced our FY2023-24e consolidated EPS estimate 1-11% on lower Ebitda margin estimates. Upgrade to reduce (from sales) because the stock price has been corrected by 10% in the last one month The fair price on the basis of 20X June 2024e Individual EPS and 12X June 2024e Subsidiary EPS remains unchanged at Rs.

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