Bharat Forge LtdQ1 FY23Auto Components

Bharat Forge Ltd

Q1 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

Yes

Capex

Yes

2 of 4 growth signals are positive.

Revenue guidance

Category 3

→Aerospace business has grown more than 100% and is expected to continue growing at 30%-50% in FY23.
→Industrial business, including forging and casting, is expected to sustain double-digit growth, fueled by renewable energy, Make in India, and infrastructure development.
→Domestic truck market is expected to see single-digit growth this year with stable demand.
→Defense business aims to exceed $100 million revenue this year, with capacity tripling by early 2024, driving substantial growth next year.
→Overseas aluminum businesses are expected to improve, contributing positively to consolidated ratios.
→Standalone business anticipates strong growth in revenues, profitability, and return ratios in FY24.
→Overall positive outlook on commercial vehicles globally with steady demand and market share gains.
→E-mobility segment to ramp production and build scalable supply for future growth.
→New order wins of around ₹1,500 crore in standalone component and industrial verticals support growth momentum.

Category 3

→FY24 is expected to be a seminal year with strong growth across revenues, profitability, and return ratios, driven by forging business in India and abroad along with defense, industrial, and E-mobility platforms.
→Overseas aluminum businesses are expected to improve profitability and contribute positively to consolidated ratios.
→Defense business target is to cross $100 million in revenue for FY23, with substantial growth projected next year due to new mega plant capacity expansion.
→Aerospace sector has grown more than 100% in FY23 and is expected to grow 30-50% in FY24.
→Industrial business expects to continue double-digit growth, aided by growth in renewable energy and infrastructure development in India.
→US and European operations are expected to turn profitable starting Q1 and Q3 respectively, improving overall earnings.
→EBITDA margin targets include mid-teen margins in medium term for the overseas subsidiaries post ramp-up and price recovery.
→Indian truck market growth projected at single-digit in FY24, supporting domestic earnings expansion.

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→There is no mention of any current or future fundraising activities through debt or equity in the provided transcript.
→The company discusses stable normalized interest outgo of about ₹60-65 crores per quarter based on current interest rates, indicating ongoing debt servicing but no new fundraising.
→Focus appears to be on organic growth, ramping up production, and technology absorption rather than raising new capital.
→Management states no plans for complicated or foreign acquisitions; emphasis is on bolt-on acquisitions within India.
→There is no explicit reference to plans for raising funds via equity or additional borrowing in the recent or upcoming periods.

Yes

→Defense Business order book includes export orders of over ₹2000 crore.
→Approval of AoN for 300 AT AGS guns, with the RFQ expected soon and order placement this year.
→Defense order for 307 AT AGS guns to be executed over four years from first supply year.
→Defense revenue expected to cross $100 million in the current year, with plans for substantial growth next year.
→New mega defense plant with triple the current capacity to start production by Jan-Feb 2024.
→New order wins of about ₹1500 crore across component and industrial verticals in standalone business.
→Aerospace business growing over 100% last year, expected growth of 30-50% in FY23, aiming for ₹500-600 crore annual revenue in a few years.
→Stable industrial and oil & gas orders, with double-digit growth expected in the industrial sector.

Yes

→Acquisition of ISML (Coimbatore) to close in two weeks, adding to capacity and capabilities.
→Capital expenditure (CAPEX) in Coimbatore, JSA, and ISML to more than double forging capacity from ~40,000 tons to over 120,000 tons in two years.
→Revenues expected to more than double in two years from current levels, driven by new units and CAPEX.
→Focus on creating a green foundry with least carbon footprint and emissions for sustainable growth.
→Ramp-up of new plant for electric two-wheelers started production recently, targeting capacity utilization of 1,500 to 1,800 bikes shortly, then 2,000+.
→Joint venture with Talgo for manufacturing high-speed trains in India under technical evaluation and nearing conclusion.
→No large acquisitions planned except platform bolt-ons like JSA and ISML within India, emphasizing organic growth and Indian manufacturing base.

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