Bharat Forge shares hit 23 months low after dropping automobile sales numbers in December

Shares of Bharat Forge (BFL) hit a 23-month low of INR 470 per share, down 4 per cent on the BSE in early morning trade in an otherwise firm market. This followed a after the domestic automobile companies reported bearish sales numbers during the month of December 2018, driven by adverse macroeconomic conditions.

BFL is a leading global ‘Full Service Supplier’ of forged as well as machined engine and chassis components. BFL is India’s largest exporter of auto components and the world’s leading manufacturer of chassis components. The company manufactures a wide range of safety and critical components for passenger cars, SUVs, light, medium & heavy CVs, tractors and diesel engines.

The company’s stocks have been trading at its lowest level since February 1, 2017 and in the last four months it fell 32 per cent.

In general, automotive sector reported bearish results in December. Among the automobile companies, Maruti Suzuki India, Hyundai Motor India, Honda Cars India and Tata Motors posted single digit growth in December while Mahindra & Mahindra (M&M) reported a decline in sales.

“Despite near term slowdown in its user market, Management expects BFL to perform better than the underlying market as it anticipates its’s content per vehicle to improve over the next 2-3 years on account of new product development and supply to its customers,” analyst at Karvy Stock Broking said in management meet note.

However, the company expects to increase the sale of its Medium and Heavy Commercial Vehicle segment in FY20, on account of pre-buying due to emission norm changes. Bharat Forge has recently received the first export order for its aluminium light weighting business. This is expected to boost their growth in the medium term.

“… with implementation of WLTP (Worldwide Harmonised Light Vehicle Test Procedure) in EU starting September 1, 2018, OE sales have been lower, impacting the aluminium forging volumes done at European subsidiaries (likely to continue till 4QCY18),” analysts at JM Financial Services said about BFL.