Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bharat Forge Ltd (BOM:500493, Financial) reported a resilient standalone performance with a margin expansion of 140 basis points to 28.8%, driven by a favorable product mix.
- The company has a strong balance sheet with a gross debt to equity ratio of 0.46 times and cash on hand of almost INR2,000 crore, positioning it well for future opportunities.
- Bharat Forge Ltd (BOM:500493) won new orders worth INR2,200 crore in the first half of the fiscal year, with a significant portion from the defense sector.
- The defense segment showed impressive growth with a 67% year-over-year increase in revenue, and the order book stands at about INR5,900 crore.
- The aerospace business is expected to grow substantially, with new orders indicating a potential for exponential growth compared to the previous year.
Negative Points
- The European market remains challenging, impacting the company's overall performance, particularly in the commercial vehicle and passenger vehicle export business.
- The overseas operations faced a seasonally weak quarter, with European operations posting an EBITDA of INR75 crore and US operations reducing their EBITDA loss to INR45 crore.
- The EV vertical is taking longer to reach EBITDA break-even due to the current slowdown in Europe.
- Asia revenue saw a year-over-year decline due to a slowdown in certain countries and inventory corrections.
- The company is experiencing some pain in its European and Swedish operations, necessitating downsizing efforts to address these challenges.
Q & A Highlights
Q: Is the export gun order fully serviced, or is there anything pending?
A: The export gun order is not fully serviced yet. We still have a large order pipeline, with a total order book of about INR6,000 crore. - Amit Kalyani, Joint Managing Director, Executive Director
Q: Can you provide details on the aerospace business revenue for the first half?
A: The aerospace business revenue for the first half is approximately INR100 crore. - Kedar Dixit, Chief Financial Officer
Q: What is the expected CapEx for the full year, and how much has been invested in subsidiaries?
A: The CapEx for the first half at a consolidated level was close to INR820 crore. There is not much CapEx left for subsidiaries, with only about $8 million to $10 million remaining for the US phase two. The rest was in India, with significantly lower CapEx expected in the second half. - Amit Kalyani, Joint Managing Director, Executive Director
Q: Can you explain the defense order book calculation and the products involved?
A: The defense order book is currently about INR6,000 crore, including a combination of vehicles, guns, and components. The discrepancy in numbers can be clarified offline. - Amit Kalyani, Joint Managing Director, Executive Director
Q: What is the outlook for the European market and margin improvement?
A: We expect improvements next year, with better margins anticipated as we adjust costs. Aluminum side progress is good, and steel side demand issues are being addressed. - Amit Kalyani, Joint Managing Director, Executive Director
Q: What are the plans for subsidiary investments, particularly in the EV business?
A: Investments are being made in the second phase of US CapEx and the EV business to set up assets generating revenue from next year. - Amit Kalyani, Joint Managing Director, Executive Director
Q: Can you provide insights into the defense business growth and order book expectations?
A: The defense business is expected to grow substantially, with a focus on exports. We anticipate 40% to 50% growth this year and continued growth next year. - Amit Kalyani, Joint Managing Director, Executive Director
Q: What is the expected timeline and size for the ATAG order?
A: The ATAG order process is ongoing, with expectations to receive it by the end of this financial year. The order size is significant, and revenue contribution is expected from Q1 FY26. - Amit Kalyani, Joint Managing Director, Executive Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
