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Reducing CV exposure may lift earnings at Bharat Forge

Bharat Forge is trading at a one year forward price to earnings ratio (P/E) of 18x.

ET Bureau|
Last Updated: Oct 15, 2019, 09.24 AM IST
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The component maker’s revenue mix is expected to move away from commercial vehicles (44 per cent, at present) and industrial segment (44 per cent) and towards passenger vehicles (12 per cent) and new business initiatives (0 per cent) in the longterm.
The revenue performance of components maker Bharat Forge is expected to remain subdued in the near-term as one of the company’s primary client sectors of commercial vehicles is going through a protracted slowdown with sales expected to decline in excess of 30 per cent during the current fiscal.

However, the world’s largest forging company's investments in new businesses like light-metals forging, manufacturing for the defence sector, electric vehicles, nanotechnology, and composite materials will help it support growth in the medium term, as per an Emkay Research report.

The component maker’s revenue mix is expected to move away from commercial vehicles (44 per cent, at present) and industrial segment (44 per cent) and towards passenger vehicles (12 per cent) and new business initiatives (0 per cent) in the longterm. The latter two segments are expected to contribute 25 per cent and 20 per cent, respectively, to the company's top-line by FY25, according to the same report.

Bharat Forge is trading at a one year forward price to earnings ratio (P/E) of 18x as against its 10-year average of 24x. The stock gained 2.62 per cent to close at ₹429 per share on the BSE.
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