Bharat Forge hits a record high on new orders, Nomura has a ‘buy’ call

Recently, Kalyani Strategic Systems, a wholly owned defence subsidiary of Bharat Forge, bagged two export orders aggregating to about Rs 850 crore

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The Bharat Forge stock rose 2 percent to hit a new high of Rs 995.20 in the morning trade on August 22, with the recent order wins brightening the company’s export order outlook.

Kalyani Strategic Systems, a wholly owned defence subsidiary of Bharat Forge, bagged two export orders aggregating to about Rs 850 crore from “friendly countries” for the supply of components and armoured vehicle chassis over 18 months.

The company commenced defence exports, of both systems and components, in Q1 FY24 and said new order worth Rs 280 crore during the quarter resulted in its combined defence order book reaching Rs 2,200-2,300 crore.

“The addition of these new orders announced should increase its defence order book to approximately Rs 3,000-3,100 crore,” brokerage house Nomura said.

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The foreign brokerage also said that “consistent order wins from multiple geographies and for different products indicates that Bharat Forge is on an exponential growth path in defence exports”.

Nomura has a “buy” recommendation on the stock with a target price of Rs 1,157.

The company is in the process of creating a range of novel products including vehicles, artillery systems, naval solutions, components, and unmanned systems. As a result, there is a strong possibility for it to evolve into a prominent exporter of defence components and systems originating in India, the brokerage firm said.

Regarding the domestic defence sector, the management foresees a potential order for 307 advanced towed artillery gun systems (ATAGS) by the army in the next three years. Some of this demand could be directed to Bharat Forge, Nomura’s analysts said.

The company has the government’s approval to participate in future defence programmes encompassing small arms and ammunition.

By the end of FY26, the foreign brokerage firm projects the company’s revenue to increase by approximately Rs 2,000 crore annually due to ATAGS sales for India and defence exports, effectively counterbalancing any potential decline in export of commercial vehicles.

The stock is trading at approximately 14 times FY25 EV/EBITDA, which appears attractive given its 31 percent compounded annual growth in EPS over FY24-26, Nomura said. The brokerage has maintained its EV/EBITDA multiple at 15 times, which is the mid-point of its historical trading band of 14-16 times.

At 9.53 am, the stock was trading at Rs 985.80 on the National Stock Exchange, up  0.59 percent from the previous close.

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