Sunday, August 25, 2013

Buy Bharat Forge
CMP: Rs.228.80
Introduction: Bharat Forge Limited (BFL), the Pune based Indian multinational is a technology-driven global leader in metal forming having trans-continental presence across a dozen manufacturing locations, serving several sectors including automobile, power, oil and gas, rail & marine, aerospace, construction & mining, etc.
Part of Kalyani Group - a US $ 2.5 billion conglomerate with 10,000 global work force; BFL today has the largest repository of metallurgical knowledge in the region and offers full service supply capability to its global marquee customers from conceptualization to product design, engineering, manufacturing, testing and validation.

Shareholding Pattern: The promoters hold 42.05% of the shares of the company, while, the general public holds 57.95%. Among the general public, it has been seen that DIIs have increased their stake both on Q-o-Q basis and also sequentially; while there has been a marginal increase in the shareholding of the FIIs speaking sequentially. 

Financials: The company reported a better-than-expected net profit of Rs.91 crore for the quarter ended June 30, 2013 (Q1), due to lower raw materials and manufacturing cost. Analyst expected a profit of Rs.67 crore for the quarter. The company had reported profit of Rs.50 crore in March quarter and Rs.105 crore in June quarter last year. The company’s total income from operations during the quarter declined by 15.4% at Rs.792 crore, while total expenditure fell by 14% at Rs.657 crore over the previous year quarter.

Recommendation: The investors can buy the scrip at the CMP of Rs.228.80, for a target of Rs.292, in the next few trading sessions, on the back of strong execution pipeline and improving demand from export markets. The demand has started to pick up and it was better than initially anticipated during the quarter ended June, 30, 2013. The company also looks to further improve operational efficiency, going forward. Please keep Stop Losses of Rs.211 and Rs.197, for any reversal in the share price. However, since the scrip is near its 52-week low price of Rs.185.55, the downside seems to be limited.