Exit Bharat Gears

Bharat Gears, an Auto Ancillary company, has disappointed investors in its Q3 results released today. The company has reported a 20% decline in its topline to Rs 89 crore. It had reported net sales of Rs 112 crore a year earlier. Its other operating income has also declined by 23% to Rs 1.46 crore. The net profit for the quarter declined by 96% to Rs 34 lakh. The company is primarily in the business of manufacturing gears. The scrip, last year, looked very promising but the slowdown in the commercial vehicles has taken a toll on the business of Bharat Gears.

The company has also reported a decline of 6% in its topline for the 9 months period of the current fiscal while its bottomline has declined by a whopping 69%.

Even at the operating level, its margins have declined significantly. From 11.02% margins in the third quarter of last fiscal, the margins have declined to 6.25% in Dec 2012. The rise in the inventories share indicate that the company is facing a slowdown on that front.

The performance of the company has remained poor on the other income front which has declined by 79% to Rs 98 lakh. Its interest and tax expenses have declined but the operating performance and business growth are absolutely poor at the moment.

Last year the company had said that it would commission a new manufacturing capacity expanding total capacity by 20%. There has not been any further announcement on that front, which indicates that the company may not be on the track to add the capacity.

We advice our readers to exit the stock at CMP and not take any exposure to the stock until the company comes up with better earnings.