Buy This Auto Stock With A Target Price Of Rs. 840, Brokerage Firm Recommends

Brokerage firm Emkay Global has suggested buying the stock of Bharat Forge for a 23.2% return. Advocating for the stock, the firm stated, "The demand outlook for CY22/23 provided by 23 global entities, including CV/PV OEMs, non-auto companies and industry associations offers a positive read-through for forging."

Target Price

The Current Market Price (CMP) of Bharat Forge is Rs. 682. Emkay Global has estimated a Target Price for the stock at Rs. 840. The stock is expected to offer a 23.2% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 682
Target Price	Rs. 840
1 year return	23.20%

Company performance

With an order book of almost one year, Volvo and Paccar expect the HCV segment to grow strongly by up to 12% in CY22 and 22% in CY23 in the North America and Europe regions. Strong demand should support higher volumes in CY22/23. Volkswagen and Mercedes expect up to 10% growth in CY22 in their global businesses, led by the pending order book, economic recovery, and low channel inventory. Volvo and John Deere expect the construction equipment and tractor segments to grow by 10-20% in the North America and Europe regions in CY22. ACE and Escorts expect 15-20% growth for the construction equipment segment in India in FY23.

Comments by Emkay Global

Emkay Global thinks, "Bharat Forge is expected to clock a revenue CAGR of 16% in FY22-24E, led by the continuation of a cyclical recovery in the underlying auto and industrial segments in both domestic and overseas markets. Moreover, nascent segments, such as Defense, Renewables, Aerospace, Railways, E-mobility and Light-weighting solutions, have the potential to cross US$100mn each in revenues in the medium term. We reduce our FY23E/24E EPS by 6%/4%, factoring in delays in the pass-through of commodity inflation, higher freight costs and some reduction in revenues."

About the company

Part of the Kalyani Group - A US$3 billion conglomerate with a 10,000 global workforce, they have the largest repository of metallurgical know-how, design & engineering expertise, and manufacturing prowess in the region, which has established them as one of the leading forging manufacturers in India. Based on these, Bharat Forge is a leading auto parts manufacturer in India. The North America Oil & Gas segment of the company is also expected to see a multi-year upcycle, with 20%+ growth in CY22, owing to an improvement in fracking activity, as per Halliburton and Schlumberger.

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Disclaimer

The above stock was picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.