Defence stock to buy now for an upside potential of 20%; Do you own it?

Bharat Forge, a leading global manufacturer of automotive components and industrial products, has established itself as a key player in the engineering and manufacturing sectors. Known for its strong presence in the automotive, aerospace, and defense industries, the company continues to innovate and expand its portfolio. As investors look for opportunities, many are considering whether now is the right time to buy Bharat Forge, especially in light of the latest target price set by JP Morgan.

Price Movement

During Wednesday’s trading session, shares of Bharat Forge Ltd reached an intra-day high of Rs.1,080.65 per share, rising 5.5 percent from its previous close of Rs.1,064.30 per share. However, the stock declined later to Rs.1,063.70 each. Over the past five years, the shares have delivered over 180 percent returns.

Business Overview

Bharat Forge, established by Nilkanthrao A. Kalyani on June 19, 1961, is headquartered in Pune, Maharashtra, and serves as the flagship company of the Kalyani Group. Bharat Forge produces a wide array of components, including front axle beams, steering knuckles, connecting rods, crankshafts, and aluminum castings.

The company operates manufacturing facilities in India, Germany, and Sweden, positioning itself as a global player. In India, Bharat Forge has production units in locations such as Mundhwa, Satara, Baramati, Chakan, and Nellore. It is recognized for housing the largest single-location forging facility in the world.

Export Performance

Bharat Forge’s export performance for Q3 FY25 reveals a geographical breakdown of revenue in Rs. Crores. The Americas lead with the largest share at Rs.854.0 crores, followed by Europe at Rs.233.3 crores, and Asia at Rs.63.7 crores. The total exports for Bharat Forge in Q3 FY25 amount to Rs.1,151.0 crores.

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Earnings Report

According to its latest financial update, Bharat Forge reported consolidated revenue of Rs.3,476 crores in Q3 FY25, showing a 10 percent decline from Rs.3,866 crores in Q3 FY24. The company also saw a significant drop in net profit, which fell to Rs.213 crores, marking a 16.1 percent decrease from Rs.254 crores in the same period last year.

Ratio Analysis

The company has a Return on Capital Employed (ROCE) of 13.71 percent and a Return on Equity (ROE) of 14.3 percent. Its Price-to-Earnings (P/E) ratio stands at 51.45, higher than the industry average of 40.36. Furthermore, the company maintains a current ratio of 2.72, a debt-to-equity ratio of 1.06, and an Earnings Per Share (EPS) of Rs.20.68.

Target Recommendation

JP Morgan, a prominent brokerage firm, has recommended a “Buy” call on Bharat Forge with a target price of Rs.1,270.00 per share, indicating an upside potential of 20 percent from current market price.

Written by – Siddesh S Raskar

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