There were various problems associated with the scrip:

 

1. Slump in the auto industry

 

2. FCCB issue

 

3. Subsidiaries which could act as a drag on the bottomline.

 

To address these issues, management decided to focus on non automotive business by making foray into forging components for the non automotive sectors especially power etc. This strategy will reduce the risk of auto industry slowdown and increase the margins of the company because there is a lot of value addition in non automotive business.

 

The Unaudited results for the Quarter ended March 31, 2009

The Company has posted a net profit of Rs 611.30 million for the quarter ended March 31, 2009 as compared to Rs 828.50 million for the quarter ended March 31, 2008. Total Income has decreased from Rs 5923.10 million for the quarter ended March 31, 2008 to Rs 3068.40 million for the quarter ended March 31, 2009.

The Audited results for the Year ended March 31, 2009

The Company has posted a net profit of Rs 1032.90 million for the year ended March 31, 2009 as compared to Rs 2735.90 million for the year ended March 31, 2008. Total Income has decreased from Rs 22588.40 million for the year ended March 31, 2008 to Rs 21063.50 million for the year ended March 31, 2009.

The Consolidated results are as follows:

The Audited consolidated results for the Year ended March 31, 2009

The Group has posted a Income attributable to the consolidated group of Rs 582.60 million for the year ended March 31, 2009 as compared to Rs 3015.30 million for the year ended March 31, 2008. Total Income has increased from Rs 47304.60 million for the year ended March 31, 2008 to Rs 48427.50 million for the year ended March 31, 2009.

 

 

Exports emerged as the saving grace for the company, registering a 4% growth for the full year. Important to add that the exports grew despite the drastic fall in production in the company’s exports markets because of two factors. One, the company managed to increase its market share and second, it tapped newer segments like the non-automotive forgings. Speaking of latter, its contribution to the company’s standalone topline increased to 28% from 20% in FY08. The fact that the rupee weakened against the dollar and the company was able to pass through raw material cost hikes also helped growth in exports. As far as the prospects for the current fiscal are concerned, the company is of the belief that the worst is behind us and Bharat Forge’s own performance might be better than that witnessed in the second half of the fiscal.

Apart from fall in operating profits, movement in all the other P&L items has also remained adverse, putting further pressure on the company’s standalone profitability. Furthermore, forex losses to the tune of Rs 863 m on account of revaluation of foreign currency assets/liabilities also hurt its performance. These factors put together have led to a 62% drop in company’s standalone bottomline during the fiscal.

Standalone eps is 4.62 and consolidated eps is 2.62.

I have hereby posted the facts I know before the forum.

The question one needs to answer is IS THE WORST OVER FOR THE STOCK? DOES IT MERIT CONSIDERATION FOR INVESTMENT FOR THE LONG TERM?

According to a result update I read , FY 11 eps is expected to be around 16-17 and if that is so the stock currently is available at a forward pe of about 8-9.

Overhang of FCCB remains because they are not hedged and if rupee depreciates against the dollar, the notional losses may increases.

At present Bharat forge looks like a long term bet where if things fall into place, the stock could give very good returns.

 

 

it's important to ride these strong cyclicals into good economy.......

 

Otherwise what is the point in providing support during bad times?

 

i.e. unless you have found a far more attractive deal