Analyst Concall
Bharat Forge Oct-Dec overseas revenue falls on low demand
This story was originally published at 21:45 IST on 12 February 2025
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--Bharat Forge: Performance of oversees ops was disappointing in Oct-Dec
--Bharat Forge: Oct-Dec utilisation weak due to low demand in Europe, US
--CONTEXT: Comments by Bharat Forge's mgmt in post-earnings analyst concall
--Bharat Forge: Outlook for CVs in India seen better in Jan-Mar than Oct-Dec
--Bharat Forge: Doing thorough review of manufacturing footprint in Europe
--Bharat Forge: Need two quarters more to decide on way forward in Europe
--Bharat Forge: To invest INR 5.0 bln-INR 5.5 bln on consolidated basis FY26
--Bharat Forge: Aerospace revenue per quater INR 500 mln-INR 600 mln
--Bharat Forge: Aerospace revenue could double on commissioning of new unit
--Bharat Forge: May fall short of 40-50% FY25 growth guidance for defence
--Bharat Forge: Too early to talk about entry into semiconductor business
By Akshay V. Johnson and Sunil Raghu
MUMBAI – Bharat Forge Ltd.'s oversees business struggled during the December quarter due to weak demand from Europe and some customer-specific weakness, the management said in a post-earnings analyst conference call Wednesday. The company's earnings before interest, tax, depreciation and amortisation from its European business for the Oct-Dec period was INR 100 million, and the EBITDA loss of its US operations declined to INR 60 million, the management said.
The company's capacity utilisation during the quarter was low due to weak demand in Europe. On the European business, Bharat Forge's management said that the company is doing a thorough review of its manufacturing footprint in the continent and expects to have a concrete answer in the next two quarters.
The company witnessed a slowdown in the US market due to the transition underway between electrical vehicles and internal combustion engine vehicles. There has been a rethinking in the industry around the whole electrification bandwagon, the management said, adding that it is too early to talk about its possible entry into the semiconductor manufacturing space.
The company plans a capital expenditure of INR 5.0 billion to INR 5.5 billion on a consolidated basis in 2025-26 (Apr-Mar). Out of the total capital expenditure, around INR 2.5 billion will be by the subsidiaries and the remaining INR 3 billion by the company.
Casting and aerospace, Bharat Forge's new business verticals, are doing well and will continue to do so, the management said. As for the casting vertical, the company experienced good customer traction during the quarter and it expects the segment's margin to increase by at least 250-300 basis points in the next two years.
The company is also setting up a new aerospace parts manufacturing facility in India and has a long-term agreement with a European company to manufacture landing gear and aerospace components for global original equipment manufacturers, the management said. This segment currently posts a revenue of INR 500 million-INR 600 million per quarter and the management says this could double with the commissioning of the new plant, the management said.
While Bharat Forge's management expects the Indian commercial vehicle segment to perform better in the March quarter compared with the December quarter, it expects the segment to see more or less flat growth in FY26.
Bharat Forge's US commercial vehicle segment is expected to see 10% growth, especially in the second half of FY26, and its European commercial vehicle market is expected to be flat and unpredictable with multiple elections coming up in the region, the management said.
As for the defence segment, the company may fall short of the 40-50% growth guidance for FY25, due to certain delay in approvals and the lumpy nature of the business, the management added. The defence segment will become order book accretive by the end of March quarter because of the domestic advanced towed artillery gun system orders.
Bharat Forge recorded 60-70% on-year growth in its oil and gas segment for the December quarter. US President Donald Trump intends to complete the Keystone Pipeline, which will connect Alberta in Canada to refineries in Texas and Illinois. This going to lead to a big infrastructure boom, which will further boost the company's revenue in this segment, the management said.
The company reported a net profit of INR 3.46 billion for the December quarter, down more than 8% on year and below analysts' estimate of INR 3.76 billion. The company's revenue from operations for the period declined 7% on year to INR 20.96 billion. Analysts had projected the top line at INR 22.84 billion. The company announced Oct-Dec results post market hours Wednesday. Shares of the company closed at INR 1,104.65 on the National Stock Exchange, down 0.7% from the previous close. End
Edited by Nishant Maher
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