My View On Bharat Forge

About The Stock

The Company was incorporated on 19th June 1961Mumbai. The main object of the Company is to manufacture forgings and finished crankshafts. This has been one of the most fancied stock of the capital market.Bharat Forge has three plants in Germany and one each in Sweden, Scotland and the US. It also has two plants in China.Its manufacturing facilities are now fully operational in Mundhwa in Pune as well as in Baramati and these facilities are expected to start contributing to the bottomlines soon

About the Results

An almost 70% cut in production during the third quarter, especially in October, led to the overall fall in performance. Europe, where it earns a major source of income also saw a 70% fall and this led to an almost zero off take from suppliers. This apart, the company had a MTM forex loss of Rs.40 crore. These two reasons were enough to pull down the company, financially. The company posted a consolidated net loss of Rs 36.5 crore in Q3FY09 as against a profit of Rs 70.9 crore Q3FY08. The company's consolidated net sales too went down 11% on a YoY at Rs 959.9 crore.

The slowdown is expected to continue, especially in the automotive sector till the first half of FY10. Currently 80% of its revenue comes from the auto sector and taking lessons from this slowdown, it has decided to turn this mix from 80% to 60% by 2012 and to a meager 25% by 2015.

Some Cues In the Stock

1. The company is making moves to increase its presence in the non automotive sector, which is largely related to energy, infrastructure, marine and railways.

2. The company has recently signed a joint venture agreement Areva to build a manufacturing facility for non-automotive forgings, including those for power sector applications.

3. It expects to have a major stake in the power sector in the coming years. But till then, atleast in the coming few months, FY09 and first half of FY10 looks grim.

About The Stock

The stock has potential as it's name do. One can consider while allocating it funds in a diversified portfolio. In dips it could be bought for medium to long term gain.

Disclaimer : I do not have any personal holding in this stock.