Recommendation Review: Bharat Forge

Bharat Forge is the second largest forging company in the world. It is a supplier to virtually all the global automotive original equipment manufacturers (OEMs) and has a majority of its revenues coming in from the automobile sector.

We had recommended this company to our readers in DSIJ Vol. 28 Issue No. 3 (dated January 27, 2013), when the stock was trading at a price of Rs 258 per share. Our recommendation was backed by the company’s strong global presence and its efforts to diversify risk by spreading its operations to areas like capital goods, infrastructure, EPC, etc. After our recommendation, however, the scrip saw a southward move. In our review of the counter in DSIJ Vol. 28, Issue No. 9 (dated April 21, 2013), we had recommended that investors hold the stock.

Now, with the automobile companies giving some positive signals along with indications of a bounceback in industrial activity in H2FY14, the scrip has picked up pace. It is currently trading at Rs 293, yielding returns of about 13 per cent. The company’s financial performance was also good in the September 2013 quarter, with the topline coming in at Rs 845.11 crore and the bottomline at Rs 96.38 crore as against Rs 791.56 crore and Rs 90.60 crore in the June 2013 quarter. This is the third consecutive quarter where the company has seen a strong performance on a sequential basis. With an uncertain market scenario and the impressive returns that the scrip is providing, booking profits at the current levels would be a prudent strategy.