BHARATFORG - Bharat Forge Ltd Share Price

Bharat Forge's management provided a cautiously optimistic outlook for the upcoming quarters, despite challenges faced in the first quarter of FY'26. Key points from the management include:

1. Revenue Performance: Standalone revenue for Q1 was Rs. 2,105 crores, a decrease of 2.7%, while consolidated revenue increased by 1.5% quarter-on-quarter to Rs. 3,909 crores.

2. EBITDA Details: Standalone EBITDA stood at Rs. 588 crores, reflecting a 6.5% decline, attributed to low utilization and a less favorable product mix. Consolidated EBITDA improved to Rs. 682 crores, achieving a margin of 17.4%.

3. New Business Acquisition: The company secured new business worth approximately Rs. 850 crores during the quarter.

4. Future Forecast:

   • Management expects Q2 to be weaker but anticipates a better performance in the second half of FY'26.
   • Aerospace business is expected to maintain an annual growth rate of over 20%.
   • The acquisition of American Axle India CV Assets is anticipated to contribute Rs. 1,000 crores to the consolidated topline for the fiscal year.

5. Defense Business Pipeline: There is strong visibility with a backlog of orders, which includes a tender expected to add Rs. 1,400 crore to the order book.

6. Tariff Impacts: The company absorbed Rs. 14 crores in tariff-related expenses during Q1 and is actively engaging with customers to mitigate these tariff uncertainties.

7. Operational Improvements: The U.S. aluminum business showed stability, achieving a positive EBITDA margin of 6.1% with current utilization rates at about 70%.

8. Growth Strategies: The management highlighted ongoing evaluations of restructuring options for the European steel business and potential opportunities within India's manufacturing growth.

This strategic outlook signifies a pathway to recovery and growth, particularly in key sectors like aerospace and defense, while managing ongoing tariff challenges.

Q1 Question and Answer Summary from Bharat Forge Earnings Call (August 06, 2025)

1. Question: "Who bears the tariffs? Is it distributed across the entire chain of customers, OEMs, and suppliers? Does Bharat Forge need to bear more?"

   Answer: "Tariff costs are ultimately passed through in pricing, whether we or the customers pay them. Customers agree to collaborate in finding solutions since these charges arise from exceptional conditions."

2. Question: "With tariffs at 25%, how is the competitiveness of Indian exports? Which geographies are we facing competition from?"

   Answer: "Countries exporting similar parts all face the same tariffs. Our rates are competitive; notably, we're not lower than others. The primary competition comes from China and another region with higher tariffs."

3. Question: "Will tariffs affect order inflow from customers?"

   Answer: "So far, there hasn't been an impact on our order inflows. Approval cycles for our products are lengthy"”2 to 3 years"”making swift shifts complex, so orders remain stable despite tariff concerns."

4. Question: "Can you share more on the defense pipeline mentioned? What does it entail?"

   Answer: "We have a pipeline totaling Rs. 9,000 crores, and there's an additional tender pending that could add Rs. 1,400 crores to that figure. This reflects a mix of domestic and export opportunities."

5. Question: "Regarding U.S. aluminum profitability, what is driving improvements?"

   Answer: "Key factors include improved operational metrics and capacity utilization. Additionally, having a U.S. manufacturing source can assist OEMs in maintaining their made-in-America compliance requirements."

6. Question: "What are your expectations for KPTL E-Mobility profitability?"

   Answer: "We've reduced costs and losses at KPTL. Profitability hinges on securing significant contracts, and while challenges exist due to the current EV landscape, we're hopeful for positive trends by H2."

7. Question: "How do you foresee the second half of the fiscal year?"

   Answer: "We expect a stronger second half based on customer sentiments and ongoing discussions. However, we must assess the evolving situation with tariffs before drawing hard conclusions."

8. Question: "Can you elaborate on your partnership with Compal Electronics for manufacturing servers?"

   Answer: "We're targeting three server types: domestically mandated, AI-based, and data servers. The market potential is substantial, ranging from 20,000 to 75,000 large servers annually, presenting significant opportunities."