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  • 1. 1QFY2011 Result Update| Auto Ancillary July 27 2010 Bharat Forge ACCUMULATE CMP Rs326Performance Highlights Target PriceRs351Y/E March (Rs cr)1QFY111QFY10 % chg (yoy)Angel Est% Diff Investment Period 12 MonthsNet Sales 63035975.7579 8.8Operating Profit159 75 11214112.3Stock Info OPM (%)25.2 20.9431bp 24.4 78bpSector Auto Ancillary Reported PAT 59 16,091 5410.8Market Cap (Rs cr)7,588Source: Company, Angel ResearchBeta1.5 52 Week High / Low341/174Bharat Forge (BFL) reported strong 1QFY2011 performance. Top-line beatexpectations on higher volumes in the domestic and export markets, while Avg. Daily Volume206,764margins increased on higher utilisation levels. Thus, the resulting higher Face Value (Rs)2bottom-line growth exceeded our expectation by 10.8%. We recommend anBSE Sensex18,078Accumulate on the stock. Nifty 5,431 Top-line marginally above expectations; Net profit beats estimates on better Reuters Code BFRG.BOoperating leverage: BFL recorded a substantial 75.7% yoy growth in net sales Bloomberg [email protected](standalone) for 1QFY2011, largely on the back of the 84% yoy growth indomestic revenues and 63.2% yoy increase in exports. The domestic marketgrowth was aided by the substantial growth in overall auto volumes especially in Shareholding Pattern (%)commercial vehicles (CV) segment during the quarter. BFLs operating margins Promoters42.1improved by 430bp yoy to 25.2% during 1QFY2011. Raw material costs fell by MF / Banks / Indian Fls27.781bp yoy and accounted for 44.5% (45.3%) of net sales, largely owing to reducedFII / NRIs / OCBs14.4inventory levels. The company recorded net profit of Rs59.4cr (Rs1cr) due to Indian Public / Others 15.8overall improvement in volumes and operating leverage. Higher other incomealso aided the better growth in net profit, to a certain extent, during the quarter.Outlook and Valuation: On account of the better-than-expected 1QFY2011 Abs. (%)3m1yr 3yrperformance, we have revised upwards our estimates. On the valuation front, at Sensex 2.2 17.618.7Rs326, the stock is trading at a P/E of 17x FY2012E EPS and EV/EBITDA of 9.9xBharat Forge 18.576.016.8on a consolidated basis. We recommend an Accumulate rating on the stock, witha Target Price of Rs351, at which level the stock would trade at 18.3x P/E and10.5x EV/EBITDA on FY2012E basis. Key Financials (Consolidated) Y/E March (Rs cr)FY2009 FY2010FY2011EFY2012E Net Sales4,7113,286 4,292 5,112 % chg 2.5 (30.3)30.6 19.1 Net Profit 59(63) 294445 % chg(80.5)- - 51.5 EBITDA (%)7.6 6.2 15.3 16.1 EPS (Rs)2.6(2.8)12.6 19.1 P/E (x) 124- 26 17Vaishali Jajoo P/BV (x)4.4 3800 Ext: 344 RoE (%) 3.6(4.1)17.1 [email protected] RoCE (%)2.8(1.0)10.5 15.6 EV/Sales (x)1.9 Kothari EV/EBITDA (x)24.943.6 13.09.9022-4040 3800 Ext: [email protected]: Company, Angel ResearchPlease refer to important disclosures at the end of this report 1

2. Bharat Forge | 1QFY2011 Result UpdateExhibit 1: Quarterly performance StandaloneY/E March (Rs cr) 1QFY11 1QFY10 % chg FY10FY09 % chgNet Sales630.1358.675.71,8141,995 (9.1)Consumption of RM280.6162.672.5822.4980.5 (16.1)(% of Sales)44.5 45.3 (81.3)45.3 49.1Staff Costs 45.7 35.927.1143.6139.2 3.2(% of Sales) 7.2 10.0 7.9 7.0Manufacturing Exp. 104.8 55.389.6316.1337.7 (6.4)(% of Sales)16.6 15.4 17.4 16.9Other Expenses40.4 29.934.8137.4155.2 (11.5)(% of Sales) 6.48.3 7.6 7.8Total Expenditure471.4283.866.11,4191,612 (12.0)Operating Profit 158.7 74.9 111.9394.6382.7 3.1OPM (%) 25.2 20.9 21.8 19.2Interest29.9 25.418.1102.8100.4 2.4Depreciation46.8 38.421.9164.4149.4 10.0Other Income10.15.295.8 74.7111.1 (32.7)PBT (excl. Extr. Items) 92.1 16.3 464.7202.1244.0 (17.1)Extr. Income/(Expense) 4.2 14.9-21.4 86.3 -PBT (incl. Extr. Items) 87.91.4 5,961180.7157.7 14.6(% of Sales)13.90.4 10.07.9Provision for Taxation28.50.5 5,706.1 53.7 54.4 (1.3)(% of PBT)32.4 33.8 29.7 34.5Reported PAT59.41.0 6,091127.0103.3 23.0PATM (%) 9.40.3 7.0 5.2Equity capital (cr) 46.5 44.5 44.5 44.5EPS (Rs) 2.60.0-5.7 4.6 23.0Source: Company, Angel Research Exhibit 2: Segmental Performance - Standalone Y/E March (Rs cr) 1QFY11 1QFY10 %chgFY10 FY09 %chg Segment Revenue Steel Forging628.0 357.775.6 1,851 2,051 (9.8) Gen. Engg., Trading etc. 3.72.3 60.511.511.7 (1.7) Total Segment Revenue631.7 360.075.5 1,862 2,063 (9.7) PBIT from each segment Steel Forging143.7 59.7 140.9 374.3 392.6(4.7) Gen. Engg., Trading etc. 0.70.5 38.3 2.6 2.53.5 Total144.3 60.1 140.1 377.0 395.2(4.6) PBIT (%) Steel Forging 22.9 16.7 20.219.1 Gen. Engg., Trading etc.17.4 20.2 22.921.7Source: Company, Angel Research July 27 2010 2 3. Bharat Forge | 1QFY2011 Result UpdateTop-line marginally above expectations; exceeds estimates by 8.8%: BFL recorded a substantial 75.7% yoy growth in net sales (standalone) during 1QFY2011, largely on the back of the 84% yoy growth in domestic revenues and 63.2% yoy increase in exports. The domestic market growth was aided by the substantial growth in overall auto volumes especially in the CV segment during the quarter. On the exports front, as per management, volumes particularly in the US, recorded an improvement in 4QFY2010, which continued in 1QFY2011. At present, the company is operating at optimum utilization levels, which is expected to improve going forward. Production volumes, in tonnage terms, have steadily improved from a low of 22,837 tonnes in 1QFY2010 to 42,643 tonnes in 1QFY2011.Exhibit 3: Domestic revenues up 84% Exhibit 4: Reviving exports growth, up 63% yoy(Rs cr) (%) (Rs cr)(%)500150 300100 63.298.9 82.8 375100 2255084.0 25047.6501500(18.2) (52.0) 125075(50)(36.5) (56.3)(16.9)0(50)0(100) 1QFY102QFY10 3QFY10 4QFY101QFY111QFY10 2QFY103QFY10 4QFY101QFY11Domestic Revenueyoy change (RHS)Exports Revenue yoy change (RHS)Source: Company, Angel Research Source: Company, Angel ResearchExhibit 5: Increasing volumes and utilisation levelsExhibit 6: Geographical break up of revenue(%) (%) 50,000 607551 46 40,00042 6545616163 36 6050 30,000 26 30 20,0002515 26 10,000 22 2022 171913151612 00 01QFY102QFY10 3QFY10 4QFY101QFY111QFY102QFY103QFY10 4QFY10 1QFY11Volume (tonnage) Capacity Utilisation (RHS) IndiaUSEuropeOthersSource: Company, Angel Research Source: Company, Angel Research Lower raw material costs, higher operating leverage helps improve margins: BFLs operating margins improved by 430bp yoy to 25.2% during 1QFY2011. Raw material costs fell by 81bp yoy and accounted for 44.5% (45.3%) of net sales, largely owing to reduced inventory levels. The company achieved significant operating leverage following the reduction in staff costs and other expenditure to the extent of 277bp and 194bp, respectively. Thus, overall the company recorded 112% yoy jump in operating profit to Rs159cr on a standalone basis. July 27 20103 4. Bharat Forge | 1QFY2011 Result Update Exhibit 7: EBITDA margins up 430bpExhibit 8: Net profit beats estimates (%)(Rs cr)(%) 608015 46.3 44.9 45.445.0 46.1 45 60 10.7 10 7.3 9.3 3024.0 23.425.0 15 20 0.3 0001QFY10 2QFY103QFY10 4QFY10 1QFY11 1QFY10 2QFY10 3QFY104QFY10 1QFY11EBITDA MarginRM Cost/Net sales (excl. other opr. Inc.)Net Profit (LHS)Net Profit Margin (RHS) Source: Company, Angel Research Source: Company, Angel ResearchNet profit at Rs59.4cr, beats estimates: The company recorded net profit of Rs59.4cr (Rs1cr) due to overall improvement in volumes and operating leverage. Higher other income also aided the better growth in net profit, to a certain extent, during the quarter. However, interest cost and depreciation costs increased by 18% yoy and 22% yoy respectively, for the quarter.Consolidated performance exceeds expectation: Consolidated performance was marginally above our expectations with top-line growth of 66% yoy to Rs1,013cr (Rs609cr). Bottom-line stood at Rs62cr (net loss of Rs46cr in 1QFY2010), largely on account of the sharp turnaround in the overseas operations. In 1QFY2011, BFLs OPM, on a consolidated basis, improved by almost 860bp yoy to 18.2% (9.6%). Overall, turnaround of the overseas subsidiaries supported the strong recovery at consolidated levels.Exhibit 9: Quarterly performance - Consolidated Y/E Mar (Rs cr)1QFY111QFY104QFY10% yoy chg % qoq chg Revenue1,012.6 609.0924.0 66.3 9.6 Operating Profit 184.7 58.7 161.5 214.5 14.4 PBT & EOI 90.6 (20.3)73.2-23.7 PAT after EOI 62.1 (46.1)56.0-10.8 EPS (Rs) 2.8 (2.1) 2.5 -11.5 Source: Company, Angel Research July 27 20104 5. Bharat Forge | 1QFY2011 Result Update Exhibit 10: Top-line growth at 66% Exhibit 11: Improving EBITDA margins, profitability (Rs cr) (%) (Rs cr)(%)1,200 100200 2566.347.3 17.5 18.2 20900 50 125 15.512.1 15600 050 9.6(15.4) 10 (54.0)300 (50)(25) 5(63.2)0(100)(100) 01QFY102QFY10 3QFY104QFY10 1QFY111QFY102QFY10 3QFY10 4QFY101QFY11 Total Revenue yoy change (LHS)EBITDAPATEBITDA Margin (LHS)Source: Company, Angel Research Source: Company, Angel ResearchConference Call - Key Highlights International operations: The companys international operations, whichcontributed ~37% of total revenues during 1QFY2011 continues to showimprovement in performance and management remains quite optimistic of theturnaround and profitability. The US and Europe contributed 19% and 16% tototal revenues respectively, during 1QFY2011. The restructuring exercise thatthe company carried out in CY2009 at a cost of Rs85cr to lower the breakevenlevels has started to positively impact its financial performance. The utilisationlevels on the international front are currently ~40-45%, which management istargeting to raise to ~50-55%. The company is seeing uptick in volume off-take in the US M&HCV segment after three continuous years of significantvolume reduction. However, the Europe scenario remains bleak and it isexpected to show signs of revival in the second half of FY2011E. On the backof improvement in operating leverage, the company expects expansion inmargins going ahead.China JV: BFLs JV in China has turned profitable for the first time since thecommencement of operations in April 2006. As per management, the firstquarter performance of the current fiscal has surpassed the performance oflast fiscal. Utilisation levels are currently at 50% and management is targetinga marginal increase in the same to 55-60%.Non-auto business: The companys non-auto business revenues during1QFY2011 stood at around ~Rs200cr, up from Rs140cr during 4QFY2010.The non-auto business exports during the quarter stood at ~Rs80cr.Profitability of this segment remains higher than the auto segment. Utilisationlevels, however remains weak at ~30%. Management intends to ramp it up to50% levels by the end of FY2011. Management has indicated that thecompany has won its maiden EPC contract and is also technically qualified tobid for NTPCs bulk tender. The company remains optimistic on the powerside of the business and its joint venture (JV) with Alstom is expected to startoperations during 2QFY2011E. July 27 20105 6. Bharat Forge | 1QFY2011 Result UpdateThe company intends to incur capital expenditure of Rs100cr during FY2011E for its Indian operations and has no plans to incur any capital expenditure overseas. As of June 2011, the company had net debt of ~Rs1,000cr. During 1QFY2011, the company incurred higher labour costs on account of restoration of salary cuts taken during FY2010 and due to the higher outgo on account of the annual incentives to employees.Investment ArgumentsStrong rebound in domestic operations continue on healthy growth in CV demand: BFL, being a market leader in the CV space for products like crankshaft, axle beams, connecting rods, etc. with almost 90% market share, has been able to clock robust growth sequentially. Over the last few quarters, following the overall recovery in the economic and industrial activity, CV volumes have also been showing good recovery. We estimate the domestic heavy CV segment to record CAGR of around 13% over FY2010-12E. Thus, BFL is expected to be one of the biggest beneficiaries on anticipated higher off-take by the CV segment over the next couple of years. Rebound in global economy to help turnaround of overseas operations: The company experienced tough times in the overseas market, especially in USA and Europe in the last two years. BFL had adopted various measures to counter the effects of the downturn, such as rightsizing its operations globally to adjust to the lower demand levels. Other actions taken included reduction of manpower, rationalisation of production, salary cuts and reducing administrative overheads, increased focus on working capital reduction and conservation of cash and capex holiday in FY2010. The company was focusing on improving its operational efficiencies like yield, scrap reduction, energy cost and outsourcing reduction. All these measures have helped the company in bringing down its breakeven levels to almost 50% utilisation (60-65% earlier). We believe that most of these markets are now showing signs of recovery, which would help the company to improve its consolidated performance over FY2010-12E. Non-auto diversification: The company has been diversifying its product portfolio in the non-auto segment. Though the company has order traction in this segment (oil and gas, power-thermal and nuclear, and rail), lower level of business of its clients in various industries has affected potential ramp up of utilisation levels of new capacities created especially for the segment. Around 60% of the segment revenues come from exports, while the balance comes from the domestic market. The company expects to generate around 40% of its revenue from its this segment in FY2011E on total incurred capex of around Rs500cr. BFL is confident of growing its non-auto business faster, which would act as a buffer to the prevailing difficult macro environment for its auto business. July 27 20106 7. Bharat Forge | 1QFY2011 Result Update Further, BFL has entered into a JV with Alstom and NTPC to manufacturestate-of-the-art supercritical power plant equipment in India. The JV willdesign, engineer, manufacture and deliver turbine generator islands of 600-800MW supercritical range, with total installed capacity of 5,000MW perannum. Alstom and BFL have agreed to explore the manufacture of turbinesand generators in the subcritical range, as well as for gas and nuclearapplications. The manufacturing infrastructure will include plants formanufacturing turbines, generators and all the auxiliaries that go into turbinegenerator islands. The JV entails an investment of Rs1,500cr from both thepartners. BFL is expected to invest around Rs300-350cr in the Alstom JV overthe next three years. The capacity is set to be commissioned in 2012. BFLsequity contribution in the NTPC JV would be Rs50cr over the next two years.The company has also bagged its maiden order worth Rs2,000cr in the capitalgoods space for EPC contract. This JV will help the companies show healthyperformance at consolidated levels.Outlook and Valuation A substantial portion of BFLs revenues come from the CV segment, where fullrecovery has been recorded in the last few quarters. Moreover, a major portion ofthe companys consolidated revenues come from the US, which was inrecessionary mode, and is expected to come out of it in 2010. BFLs non-autobusiness is also expected to start contributing more from FY2011E and mitigate theeffects of the slowdown in the auto segment. On account of the better-than-expected 1QFY2011 performance, we have revised estimates upwards.Exhibit 12 : Change in estimatesY/E March (Rs cr)Earlier Estimates Revised Estimates% chgFY11EFY12E FY11E FY12E FY11E FY12ENet Sales 4,2275,017 4,2925,1121.5 1.9OPM (%) 14.1 15.0 15.3 16.1120bp 105bpEPS (Rs)12.0 17.2 12.6 Company, Angel Research On the valuation front, at Rs326 the stock is trading at a P/E of 17x FY2012E EPSand EV/EBITDA of 9.9x on a consolidated basis. We recommend an Accumulaterating on the stock, with a Target Price of Rs351, at which level the stock wouldtrade at 18.3x P/E and 10.5x EV/EBITDA on FY2012E basis. July 27 20107 8. Bharat Forge | 1QFY2011 Result Update Exhibit 13: Key Assumptions Y/E MarchFY07FY08FY09FY10FY11E FY12E Sales Volume Steel Forgings (MT)95,575117,100 80,052 81,366100,000130,000 Crank Shafts-Finished Machine (No)347,951385,431327,660316,663362,670388,575 Front Axle Assembly & Comp. (No.) 423,454389,403222,057174,302266,800293,480 Utilization (%) Steel Forgings (MT)68.979.956.042.845.0 50.0 Crank Shafts-Finished Machine (No) 85.180.963.061.370.0 75.0 Front Axle Assembly & Comp. (No.)79.473.041.832.950.0 55.0 Source: Company, Angel Research Exhibit 14: Angel v/s consensus forecast Angel estimates Consensus Variation (%)FY11EFY12E FY11E FY12E FY11E FY12E Top Line (Rs cr)4,292 5,112 4,425 5,299(3.0) (3.5) EPS (Rs) 12.619.1 10.6 16.418.616.4 Source: Angel Research, BloombergExhibit 15: One-year forward EV/EBITDA bandExhibit 16: One-year forward EV/EBITDA chart(Rs cr) EV (Rs cr) 5x 10x15x20x One-yr forward EV/EBITDAFive-yr average EV/EBITDA 30 16,000 12,000 20 8,000104,0000 0 Dec-05Oct-06Nov-08 Jan-08 Jun-08May-06 Jul-05Jul-10Feb-05Mar-07 Feb-10Apr-04Apr-09 Sep-04 Aug-07 Sep-09Jan-06 Jan-07Jan-08Jan-09Jan-10 Jul-05Jul-06 Jul-07Jul-08Jul-09Jul-10 Source: Company, Angel Research, Bloomberg Source: Company, Angel Research, Bloomberg Exhibit 17: Auto Ancillary - Recommendation summaryCMPTgt Price Upside P/E (x)EV/EBITDA (x)RoE (%)FY10-12E EPS CompanyReco. (Rs) (Rs)(%)FY11EFY12EFY11E FY12EFY11E FY12ECAGR (%)^ Automotive AxleBuy 48457819.314.8 12.67.3 6.125.9 25.9 145.5& Bharat Forge*Accumulate326351 7.725.8 17.0 13.0 9.917.1 20.6 - Bosch India# Neutral5,625- - 23.6 20.9 20.016.720.8 20.126.7 Exide Industries Accumulate13715312.016.0 13.69.4 8.228.7 26.525.8# FAG Bearings Buy 78493118.811.1 10.15.6 4.822.9 20.640.3 Motherson Sumi*Neutral 167 - - 18.5 15.06.9 6.027.7 29.733.4 Subros Buy 49 60 22.6 3.314.7 15.214.1# ^ & Source: Company, Angel Research; Note: * Consolidated Results; December Year end; September Year end;FY11E and FY12E EPS adjusted for FCCB interest after tax July 27 2010 8 9. Bharat Forge | 1QFY2011 Result UpdateProfit and Loss Statement (Consolidated) Y/E March (Rs cr)FY07 FY08 FY09 FY10 FY11EFY12E Gross sales4,3054,7704,8313,373 4,425 5,270 Less: Excise duty155.8172.5120.2 87.2 132.8 158.1 Net Sales4,1494,5984,7113,286 4,292 5,112 Total operating income 4,1494,5984,7113,286 4,292 5,112 % chg 39.6 10.82.5(30.3) 30.619.1 Total Expenditure3,5453,9484,3513,081 3,636 4,292 Net Raw Materials1,9562,1292,3071,578 2,060 2,454 Other Mfg costs717.0849.4872.2644.9 768.3 904.9 Personnel616.4678.0709.2523.9 558.0 639.0 Other255.1291.9463.1334.5 249.0 294.0 EBITDA 604.1649.5359.6204.4 656.7 820.5 % chg 27.17.5(44.6) (43.2) 221.3 24.9 (% of Net Sales)14.6 Depreciation & Amortisation188.1227.1251.7245.1 262.8 269.1 EBIT 416.0422.5107.9(40.7) 393.9551.4 % chg 19.91.6(74.5)--40.0 (% of Net Sales) (1.2)9.210.8 Interest & other Charges 106.7126.9129.1130.380.840.8 Other Income 126.5154.2131.7106.3 112.7 119.4 (% of PBT)28.5 34.2111.5 (222.6) 26.519.0 Recurring PBT435.8449.7110.5(64.8) 425.8630.1 % chg 11.23.2(75.4)--48.0 Extraordinary Items (8.8)(0.8)(7.7) (17.0)-- PBT444.6450.5118.2(47.7) 425.8630.1 Tax152.4158.7 69.4 11.7 127.7 189.0 (% of PBT)34.3 35.2 58.7(24.5) 30.030.0 PAT292.3291.8 48.8(59.4) 298.1441.0 Less: Minority interest (MI)(7.1) (10.7) (17.6) (13.2) (11.9) (19.8) PAT after MI (reported)299.4302.5 66.4(46.2) 293.7445.1 Adj. PAT 290.6301.6 58.7(63.3) 293.7445.1 % chg 16.03.8(80.5)--51.5 (% of Net Sales) (1.9)6.8 8.7 Basic EPS (Rs)13.0 13.52.6 (2.8) 13.220.0 Fully Diluted EPS (Rs)13.0 13.52.6 (2.8) 12.619.1 % chg 41.83.8(80.5)--51.5 July 27 2010 9 10. Bharat Forge | 1QFY2011 Result UpdateBalance Sheet (Consolidated)Y/E March (Rs cr) FY07FY08FY09FY10FY11E FY12ESOURCES OF FUNDSEquity Share Capital 54.5 44.5 44.544.546.646.6Preference Capital- - - - - -Reserves & Surplus1,4351,6101,599 1,420 1,929 2,298Shareholders Funds 1,4901,6541,643 1,464 1,975 2,344Minority Interest31.5 70.2 95.478.366.346.5Total Loans 1,7901,6542,191 2,253 1,478978Deferred Tax Liability110.7136.9184.395.995.995.9Total Liabilities 3,4223,5164,114 3,891 3,615 3,465APPLICATION OF FUNDSGross Block 2,6723,1004,028 4,135 4,380 4,484Less: Acc. Depreciation 1,0811,3231,560 1,727 1,990 2,259Net Block 1,5911,7772,468 2,408 2,390 2,226Capital Work-in-Progress353.7584.2321.9 198.787.689.7Goodwill- - - - - -Investments 207.3298.80.2 273.7 289.2 277.2Current Assets2,7692,4782,532 2,417 2,149 2,476Cash938.9318.4488.3 597.7 168.2 142.9Loans & Advances558.7760.9720.4 657.6 756.1 874.4Other 1,2711,3991,323 1,162 1,225 1,459Current liabilities 1,4991,6231,208 1,406 1,301 1,604Net Current Assets1,2698561,324 1,011848 872Mis. Exp. not written off 0.2 (0.0) - - - -Total Assets3,4223,5164,114 3,891 3,615 3,465 July 27 201010 11. Bharat Forge | 1QFY2011 Result UpdateCash Flow Statement (Consolidated)Y/E March (Rs cr) FY07FY08 FY09 FY10 FY11EFY12EProfit before tax444.6450.5118.2(47.7) 425.8630.1Depreciation 188.1227.1251.7245.1262.8269.1Change in Working Capital (7.2)(8.9) 178.3 (282.0) 215.8(78.0)Less: Other income 121.9204.3186.9 (647.9) 408.16.3Direct taxes paid152.4158.7 69.4 11.7127.7189.0Cash Flow from Operations351.3305.7292.0551.6368.6625.8(Inc.)/Dec. in Fixed Assets (685.1) (658.2) (665.9)16.5 (134.2) (106.5)(Inc.)/Dec. in Investments46.2(91.5) 298.6 (273.5) (15.5)12.1(Inc.)/Dec. in loans and adv. 25.8(44.5) (30.8)(9.4) (40.4)25.0Other income 126.5154.2131.7106.3112.7119.4Cash Flow from Investing(486.5) (640.0) (266.4) (160.1)(77.5)50.0Issue of Equity (9.7)10.02.3100.3 (274.7)-Inc./(Dec.) in loans 630.3 (135.2) 536.5 61.8 (774.7) (500.0)Dividend Paid (Incl. Tax) 76.3 91.3 91.3 26.1 27.2 40.9Others(216.0) (252.3) (485.7) (470.3)301.7 (241.9)Cash Flow from Financing 481.0 (286.2) 144.4 (282.1) (720.6) (701.1)Inc./(Dec.) in Cash345.7 (620.6) 170.0109.3 (429.5) (25.3)Opening Cash balances593.2938.9318.4488.3597.7168.2Closing Cash balances938.9318.4488.3597.7168.2142.9 July 27 2010 11 12. Bharat Forge | 1QFY2011 Result UpdateKey RatiosY/E MarchFY07 FY08FY09 FY10 FY11E FY12EValuation Ratio (x)P/E (on FDEPS) 29.7 24.0 123.6 - 25.817.0P/CEPS 18.9 13.722.9 36.513.610.6P/BV6.0 3.8 3.2Dividend yield (%)1.1 0.6 0.7EV/Sales1.9 1.9 1.5EV/EBITDA13.4 13.224.9 43.613.0 9.9EV / Total Assets 2.4 2.4 2.3Per Share Data (Rs)EPS (Basic)11.0 13.6 2.6 (2.8) 12.619.1EPS (fully diluted)13.0 13.5 2.6 (2.8) 12.619.1Cash EPS 17.3 23.814.38.923.930.7DPS 2.9 1.5 2.0Book Value 54.6 74.373.8 65.784.8 100.7Dupont AnalysisEBIT margin10.0 9.22.3 (1.2)9.210.8Tax retention ratio 0.7 0.7 0.7Asset turnover (x)1.9 1.3 1.5RoIC (Post-tax)12.4 9.61.3 (1.5)8.211.4Cost of Debt (Post Tax) 4.8 3.0 2.3Leverage (x)0.3 0.7 0.4Operating RoE15.1 12.2 0.1 (10.2)11.814.7Returns (%)RoCE (Pre-tax) 14.0 12.2 2.8 (1.0) 10.515.6Angel RoIC (Pre-tax) 16.8 13.2 3.0 (1.2) 11.416.6RoE21.1 19.2 3.6 (4.1) 17.120.6Turnover ratios (x)Asset Turnover (Gross Block)1.8 1.0 1.2Inventory / Sales (days) 48 53 5980 5754Receivables (days) 47 53 4758 4646Payables (days)99 90 661247776WC cycle (ex-cash) (days)23 34 5369 4650Solvency ratios (x)Net debt to equity0.4 0.5 0.2Net debt to EBITDA1.1 1.6 0.7Interest Coverage (EBIT/Interest) 3.9 3.30.8 (0.3)4.913.5 July 27 2010 12 13. Bharat Forge | 1QFY2011 Result Update Research Team Tel: 022 - 4040 3800E-mail: [email protected] Website: www.angeltrade.comDISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment.Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. 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Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.Disclosure of Interest StatementBharat Forge1. Analyst ownership of the stockYes2. Angel and its Group companies ownership of the stockYes3. Angel and its Group companies' Directors ownership of the stockNo4. Broking relationship with company coveredNo Note: We have not considered any Exposure below Rs 1 lakh for Angel, its Group companies and Directors. Ratings (Returns) : Buy (> 15%)Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to 15%)Sell (< -15%) July 27 201013