20 May 2015

4QFY15 Results Update | Sector: Automobiles

Bharat Forge

Jinesh Gandhi (Jinesh@MotilalOswal.com); +91 22 3982 5416

Jay Shah (Jay.Shah@MotilalOswal.com); +91 22 3078 4701

BSE SENSEX S&P CNX CMP: INR1,238 TP: INR1,555 (+26%) Buy 27,837 8,423 Bloomberg BHFC IN

Equity Shares (m) 232.8

M.Cap. (INR b) / (USD b) 288.2/4.6

52-Week Range (INR) 1363 / 457 1, 6, 12 Rel. Per (%) 6/39/148

Avg Val(INRM)/Vol 000 954/1048

Free float (%) 53.3

Financials & Valuation (INR Billion)

Y/E MAR 2015 2016E 2017E

Net Sales 76.2 93.9 114.2 EBITDA 14.4 19.8 25.5 Adj PAT 7.4 10.2 14.5 EPS (INR) 31.5 44.0 62.2 Gr. (%) 64.5 39.7 41.4 BV/Sh.(INR) 147.9 181.1 228.9 RoE (%) 24.0 26.7 30.3 RoCE (%) 22.0 27.8 32.9 P/E (x) 39.3 28.1 19.9 P/BV (X) 8.4 6.8 5.4

Estimate change 4%-7%

TP change 4%

Rating change

EBITDA margins in line; Outlook positive as ramp-up in new business drives growth Volumes grew ~18% YoY to 56,679 tons (in line). However, net realizations at

~INR216k/ton (v/s est. of ~INR221k/ton) declined ~4% QoQ (+11% YoY). Net revenues grew by ~32% YoY to ~INR12.2b (in line), driven by 45% growth in

exports (led by ~68% growth in the US) and ~15% growth in domestic revenues. EBITDA margins stood at 29.4% (in line), a decline of ~80bp QoQ (+460bp YoY).

Adj. PAT grew by 83% YoY (3.3% QoQ) to INR2b. Outlook: The management said in a press release, As we enter into FY16, we

are witnessing growth in both commercial & passenger vehicle segment across our key markets. However, the industrial sector is witnessing mixed fortunes due to the sudden slowdown in oil & gas markets and the resultant impact on other industrial sectors. Mining continues to be sluggish as well. Overall, we expect topline growth to be better than the underlying market growth.

Key highlights from the earnings call: a) The management expects FY16 revenues to grow in healthy double digits, driven by a scale-up in PVs, ramp-up in US CV business, and initial supplies in aerospace and railway orders; b) it is yet to see the impact of weak crude oil prices, but expects up to 20% segment revenue impact; c) it plans to increase R&D investment up to 3% of sales (from ~1.5% currently); d) Alstom JV plant to start operations by September 2015, but ramp-up to take 2-3 years (at full capacity, annual revenues would be ~INR40b-45b); e) BFAT (Germany) is expected to start commercial supplies of its EUR250m order from 4QCY15 onwards.

Earnings cut; maintain Buy: We lower our EPS for FY16/FY17 by 7%/4% to INR44/INR62, led by later-than-expected commencement of BFAT order and weak EUR. Valuations at ~28.1x/19.9x FY16/FY17E consolidated EPS are attractive for a global leader in forgings. Maintain Buy with a TP of ~INR1,555 (~25x FY17 EPS, in line with LPA).

Investors are advised to refer through disclosures made at the end of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

20 May 2015 2

Bharat Forge

Strong volume growth, favorable product mix drives revenues Tonnage grew 18% YoY (+6.3% QoQ). However, net realizations at ~INR216k/ton

(v/s est ~INR221k/ton), declined ~4% QoQ (+11% YoY). Net revenues grew by ~32% YoY to ~INR12.2b (in-line), driven by 45% growth in

exports (led by ~68% growth in US) and ~16% growth in domestic revenues. Non-auto revenues contribution was at ~46% (v/s 41% in 4QFY14).

Exhibit 1: Strong recovery in volume continues

Source: Company, MOSL

Exhibit 2: Realization improves reflecting improving mix

Source: Company, MOSL

Exhibit 3: Exports now contribute over 60% of S/A revenues

Source: Company, MOSL

Exhibit 4: Non-Auto contribution at 46%

Source: Company, MOSL

Exhibit 5: Revenue break-up INR m 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 India 3,634 3,925 3,580 3,289 4,226 4,363 4,408 4,643 4,859

Growth (%) -30 -10 -11 -9 16 11 23 41 15 Contribution (%) 54 50 44 41 45 44 39 39 40

US 1,612 1,869 2,094 2,216 2,914 3,296 4,285 4,928 4,904 Growth (%) -31 -26 -32 26 81 76 105 122 68 Contribution (%) 24 24 25 27 31 33 38 41 40

EU 1,316 1,827 2,161 2,118 1,756 1,887 2,293 2,122 2,145 Growth (%) -23 -15 68 90 33 3 6 0 22 Contribution (%) 20 23 26 26 19 19 20 18 18

Others 184 276 379 463 409 335 397 285 331 Growth (%) -65 -16 26 101 122 21 5 -38 -19 Contribution (%) 3 3 5 6 4 3 3 2 3

Total 6,746 7,897 8,214 8,086 9,305 9,881 11,383 11,978 12,239 Growth (%) -31 -16 -5 20 38 25 39 48 32

Source: Company, MOSL

-40

-20

0

20

40

30

38

46

54

62

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Volumes ('000 Ton) Growth (%) - RHS

162 169 170

171 183 187

179 182

192 197

195 194

201 217

225

216

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Realizations (INR '000/ton)

56 53 51 53 47 46 54 54 50 45 42 45 44 39 39 40

44 47 49 47 53 54 46 46 50 55 58 55 56 61 61 60

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Domestic Exports

65 64 66 64 63 61 65 67 65 66 59 59 58 56 52 54

35 36 34 36 37 39 35 33 35 34 41 41 42 44 48 46

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

Autos Non-Auto

20 May 2015 3

Bharat Forge

Favorable Fx, mix improvement and operating leverage drives margins EBITDA grew ~56% YoY to ~INR3.6b (v/s est ~INR3.68b). EBITDA margins at 29.4% (In-Line with est.), a decline of ~80bp QoQ (+460bp

YoY). While RM cost increased ~170bp QoQ (-240bp YoY) and staff cost (+29% YoY),

lower than estimated other expenses (-130bp QoQ, -210bp YoY) off-set impact of higher RM & staff cost.

Depreciation at ~INR497m decline on both YoY/QoQ basis due to full year impact of revised depreciation policy being accounted in 4QFY15.

Adj. PAT grew by 83% YoY (3.3% QoQ) to INR2b.

Exhibit 6: EBITDA margins to be around 28%-30%

Source: Company, MOSL

Exhibit 7: EBITDA grew 56% YoY

Source: Company, MOSL

Consolidated performance: Subsidiary EBITDA at ~INR1.2b (v/s ~INR1.8b in FY14) Net Sales were up by 14% in FY15 to INR76b (v/s est ~INR79b). While overseas

subsidiaries grew just ~2.7%, where as Indian subsidiaries de-grew by 25% due to discontinuation of EPC operations of a subsidiary.

EBITDA was up by ~43% in FY15 to INR14.7b (in-line with estimate), resulting into EBITDA margins of 19.3% (v/s 15.3% in FY14). All subsidiaries contributed ~INR1.2b to EBITDA in FY15 (v/s ~INR1.8b in FY14).

PBT before exceptional item up by ~72% to INR10.8b (in-line). Adj. PAT of INR7.3b up by 64% (v/s est ~INR7.1b). Outlook Key extracts from the management commentary

As we enter into FY16, we are witnessing growth in both Commercial & Passenger Vehicle segment across our key markets. However, Industrial sectors are witnessing mixed fortunes due to the sudden slowdown in Oil & Gas markets and resultant impact on other industrial sectors. Mining continues to be sluggish as well. Overall, we expect topline growth to be better than the underlying market growth.

Looking ahead into Q1 FY16 we anticipate demand to be higher compared to Q1 FY15 but slightly muted compared to Q4 FY15 primarily due to lower than anticipated recovery in the Indian MHCV market & decline in the Oil & Gas business.

39 41 43 44 45 43 38 38 48 52 50 48 58 62 68 63

24 24 25 26 25 23 21 21 25 26 26 25 29

29 30 29

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

EBITDA (INR '000/Ton) EBITDA Margins (%)

-80

-40

0

40

80

0

800

1,600

2,400

3,200

4,000

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

EBITDA Growth (%) - RHS

20 May 2015 4

Bharat Forge

The Company is fully focused and geared up to deliver opportunities arising from the Governments Make in India initiative for a wide spectrum of Industrial sectors in India.

Key highlights from the earnings call The management expects FY16 revenues to grow healthy double digit, driven

by: Scale up in passenger car segment, especially in exports. CV segment orders in North America (from recent addition of marquee

client) Starting of supply of Aerospace orders (although ramp-up from FY17

onwards) Ramp-up in railway business from 1 customer currently to ~4 by end FY16.

It maintained its revenue target of INR 75b revenues by FY18 on S/A basis (implying 18% CAGR over FY15-FY18).

The management indicated that it is yet to see any impact of weak crude oil prices on its oil & gas segment. However, its oil & gas segment revenues might see impact of upto 20%.

Indication from India CV OEMs is for ~20% volume growth in FY16. It continues to maintain Capex guidance of INR10b over FY15-17 on S/A basis.

FY15 capex was ~INR2.8b, whereas FY16 is expected to ~INR3b. It plans to increase R&D investment to upto 3% of sales (from ~1.5% currently). In FY15, standalone gross debt has reduced by ~INR2b to ~INR18b, whereas net

debt has reduced by ~INR2.1b to ~INR7.8b. Alstom JV: Its current order book stands at 4.6GW (7 x 660MW), which will take

3 years of full production. Plant is expected to start operations by September 2015, but ramp-up to take 2-3 years. At full capacity peak annual revenues would be ~INR40-45b.

BF Aluminiumtechnik: Its plant to service EUR250m aluminium suspension component is expected to start soon. While product validation would take 5-6 months, it expects commercial supplies to start from 4QCY15 onwards.

Valuation & view Bharat Forge has emerged stronger, leaner and healthier from the downcycle: BHFC has broadened its revenue stream by entering new segments (non-auto) and global markets. The share of auto business has declined from ~80% in FY07 to ~54% in FY15 and the share of India has reduced from ~60% to ~40%. Further, it has increased value-addition by focusing on machined components, the contribution of which has increased to ~51% in FY14, boosting realizations and margins. It has improved its balance sheet by focusing on controlling debt through lower capex, resulting in fall in net debt-equity to ~0.5x/0.4x by FY16/FY17. Auto business awaiting CV cycle recovery; focusing on PVs Benefit of US Class-8 demand improvement, driven by pre-buying before emission norm changes and gradual recovery in the EU would reflect in FY15/FY16. BHFC is a clean play on the domestic CV cycle recovery, with over 60% market share in M&HCV components. The PV segment is a focus area for BHFC, as this segment offers an opportunity size 4x that of CVs.

20 May 2015 5

Bharat Forge

Non-auto business play on investment cycle recovery The non-auto segment offers significant growth potential, as it is much larger than the auto segment. BHFC is targeting ~60% of its standalone revenues from the non-auto segment, up from the current ~46%. Its partnerships with global players (Alstom, Areva, David Brown, etc) bear testimony to its globally cost competitive engineering/manufacturing capabilities. BHFCs increasing penetration with existing and new customers, coupled with economic stability in the international market and investment cycle recovery in India, would drive ~38% revenue CAGR in the non-auto segment. Multiple levers to support/improve profitability We expect consolidated revenues to grow at a CAGR of ~22.4% over FY15-17. EBITDA margin should expand ~340bp to 22.3%, driven by higher exports from India, rising contribution from non-auto business and machined components, and operating leverage. We estimate cumulative FCF generation of ~INR25.6b during FY15-17, enabling balance sheet turning to net cash of ~INR2.7b (v/s ~INR11.8b net debt) and profitability would drive improvement in consolidated RoE to ~30.3% in FY17 from 18.1% in FY14 the highest RoE since FY07. Lower EPS, maintain Buy: We lower our EPS for FY16/FY17 by 7%/4% to INR44/INR62, led by later than expected commencement of BFAT order and weak EUR. Valuations at ~28.1x/19.9x FY16/FY17E consolidated EPS are attractive for a global leader in forgings. Maintain Buy with TP of ~INR1,555 (~25x FY17 EPS, in-line with LPA). Exhibit 8: Revised forecast (Consol) (INR M) FY16E FY17E Rev Old Chg (%) Rev Old Chg (%) Net Sales 93,915 97,320 -3.5 114,164 116,750 -2.2 EBITDA (%) 21.1 21.3 -10bp 22.3 22.5 -20bp Net Profit 10,245 11,041 -7.2 14,482 15,076 -3.9 EPS (INR) 44.0 47.4 -7.2 62.2 64.7 -3.9

Source: Company, MOSL

Exhibit 9: Valuations trading above historical average, reflecting improving fundamentals

Source: MOSL

Source: MOSL

24.7 24.8 18.5

30.7

0

40

80

120

160

May

-00

Jul-0

1

Sep-

02

Nov

-03

Jan-

05

Mar

-06

Apr-

07

Jun-

08

Aug

-09

Oct

-10

Nov

-11

Jan-

13

Mar

-14

May

-15

P/E (x) 15 Yrs Avg(x) 5 Yrs Avg(x) 10 Yrs Avg(x)

6.6

3.9 3.5

3.9

0.0

2.0

4.0

6.0

8.0

10.0

May

-00

Jul-0

1

Sep-

02

Nov

-03

Jan-

05

Mar

-06

Apr-

07

Jun-

08

Aug-

09

Oct

-10

Nov

-11

Jan-

13

Mar

-14

May

-15

P/B (x) 15 Yrs Avg(x) 5 Yrs Avg(x) 10 Yrs Avg(x)

20 May 2015 6

Bharat Forge

Exhibit 10: Comparative Valuation CMP * Rating TP P/E (x)

EV/EBITDA (x)

RoE (%)

RoCE (%)

Auto OEM's (INR) (INR) FY16E FY17E FY16E FY17E FY16E FY17E FY16E FY17E Bajaj Auto 2,151 Buy 2,407 17.1 14.3 11.4 9.3 31.9 33.4 43.6 45.0 Hero MotoCorp 2,579 Buy 2,791 18.2 14.8 12.6 10.5 39.8 41.1 55.6 56.4 TVS Motor 220 Buy 302 19.9 12.8 12.3 8.2 28.5 34.4 27.6 35.9 M&M 1,251 Neutral 1,246 17.1 13.4 14.9 12.6 15.8 16.1 16.9 17.9 Maruti Suzuki 3,712 Buy 4,617 20.7 16.1 10.8 8.7 19.3 21.2 25.9 28.3 Tata Motors 506 Buy 722 7.2 6.2 3.0 2.3 24.0 22.1 26.2 25.5 Ashok Leyland 71 Buy 84 22.6 12.2 10.8 6.5 16.6 26.5 17.0 27.1 Eicher Motors# 18,510 Buy 18,211 48.1 27.9 27.9 16.7 36.9 45.5 38.9 52.7 Auto Ancillaries Bharat Forge 1,238 Buy 1,555 28.1 19.9 15.2 11.5 26.7 30.3 27.8 32.9 Exide Industries 159 Buy 223 18.8 15.6 11.7 9.5 15.7 16.6 22.1 23.3 Amara Raja Batteries 837 Buy 1,195 25.9 17.5 14.7 10.6 29.0 33.5 40.9 45.4

# Nos. are on CY basis Source: Company, MOSL

20 May 2015 7

Bharat Forge

Key Operating Metrics

Exhibit 11: Revenue model INR M FY11 FY12 FY13 FY14 FY15 FY16E FY17E Autos 17,018 20,411 17,541 18,333 24,171 30,990 37,947 % of total revenues 64 61 60 59 53 57 55 CV 14,786 18,013 14,837 15,930 21,107 26,701 31,942 % of total revenues 55 54 51 51 46 49 46 PV 2,232 2,398 2,704 2,403 3,064 4,289 6,005 % of total revenues 8 7 9 8 7 8 9 Non-Autos 9,770 13,190 11,455 12,827 17,780 23,443 30,920 % of total revenues 36 39 40 41 39 43 45 Market mix (net sales incl Op Income)

India 17,278 19,514 15,645 15,511 18,274 25,196 33,141 % of total revenues 59 53 50 46 40 43 45 Growth (%) 51 13 -20 -1 18 38 32 Exports 12,195 17,346 15,867 18,482 27,207 33,800 41,249 % of total revenues 41 47 50 54 60 57 55 Growth (%) 72 42 -9 16 47 24 22 USA 5,774 8,083 8,933 9,179 16,522 21,479 25,989 % of total revenues 20 22 28 27 36 36 35 Growth (%) 43 40 11 3 80 30 21 EU 5,380 7,751 5,862 7,847 8,082 9,537 11,254 % of total revenues 18 21 19 23 18 16 15 Growth (%) 90 44 -24 34 3 18 18 Others 1,041 1,512 1,072 1,456 2,602 2,784 4,006 % of total revenues 4 4 3 4 6 5 5 Growth (%) 343 45 -29 36 79 7 44 Total Net Op Revenues 29,473 36,860 31,512 33,993 45,481 58,996 74,390 Growth (%) 59 25 -15 8 34 30 26 Subsidiary Revenues 21,396 25,931 20,153 33,166 30,767 34,918 39,774 Growth (%) 45 21 -22 65 -7 13 14 Net Consolidated Revenues 50,869 62,791 51,666 67,158 76,248 93,915 114,164 Growth (%) 53 23 -18 30 14 23 22 S/A EBITDA margins (%) 24.3 24.8 22.7 25.4 29.2 29.8 30.3 Consol EBITDA margins (%) 15.4 15.9 15.3 15.3 18.9 21.1 22.3 Consol EPS (INR) 13.0 18.0 11.9 19.1 31.5 44.0 62.2 Growth (%) 1,615.8 39.1 -34.2 61.3 64.5 39.7 41.4

Source: Company, MOSL

20 May 2015 8

Bharat Forge

Financials and valuations

Consolidated - Income Statement (INR Million) Y/E March FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Net Sales 33,276 50,869 62,791 51,666 67,158 76,248 93,915 114,164

Change (%) -30.3 52.9 23.4 -17.7 30.0 13.5 23.2 21.6

Total Expenditure 29,891 43,017 52,826 43,750 56,887 61,840 74,083 88,699

% of Sales 89.8 84.6 84.1 84.7 84.7 81.1 78.9 77.7

EBITDA 3,385 7,852 9,964 7,915 10,272 14,408 19,832 25,465

Margin (%) 10.2 15.4 15.9 15.3 15.3 18.9 21.1 22.3

Depreciation 2,451 2,550 3,022 3,195 3,572 3,624 4,118 4,436

EBIT 934 5,302 6,943 4,720 6,700 10,784 15,715 21,030

Int. and Finance Charges 1,303 1,534 1,860 1,672 1,692 1,356 1,253 1,081

Other Income - Rec. 511 675 915 1,121 1,249 1,368 1,201 1,436

PBT bef. EO Exp. 142 4,442 5,998 4,169 6,258 10,795 15,662 21,386

EO Expense/(Income) 787 77 0 -366 -1,037 -387 0 0

PBT after EO Exp. -645 4,365 5,998 4,535 7,295 11,182 15,662 21,386

Current Tax 119 1,397 1,796 1,529 2,100 3,587 5,417 6,904

Deferred Tax 0 0 0 0 0 0 0 0

Tax Rate (%) -18.4 32.0 29.9 33.7 28.8 32.1 34.6 32.3

Reported PAT -764 2,969 4,202 3,006 5,195 7,596 10,245 14,482

Less: Mionrity Interest -130 67 72 -41 -28 -30 0 0

Net Profit 299 2,954 4,130 2,804 4,485 7,362 10,245 14,482

Consolidated - Balance Sheet (INR Million) Y/E March FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Equity Share Capital 445 466 466 466 466 466 466 466

Total Reserves 14,185 19,064 21,373 22,098 26,367 33,976 41,702 52,825

Net Worth 14,630 19,529 21,839 22,564 26,832 34,442 42,168 53,291

Minority Interest 783 1,542 1,957 1,643 170 20 20 20

Deferred Liabilities 851 1,321 886 1,345 1,645 1,638 1,638 1,638

Total Loans 22,527 19,014 27,835 28,249 25,612 23,645 21,645 19,645

Capital Employed 38,791 41,406 52,517 53,800 54,259 59,745 65,471 74,594

Gross Block 41,344 45,010 49,798 56,452 53,945 66,142 70,142 75,642

Less: Accum. Deprn. 17,267 20,383 23,270 26,807 28,604 32,229 36,346 40,782

Net Fixed Assets 24,078 24,627 26,527 29,645 25,340 33,914 33,796 34,861

Capital WIP 1,987 2,007 5,168 6,324 5,827 1,000 1,000 1,000

Total Investments 2,737 2,614 4,450 4,160 8,012 4,955 8,012 8,012

Curr. Assets, Loans&Adv. 24,171 27,501 37,197 34,266 36,166 42,511 52,412 66,885

Inventory 6,575 8,115 10,961 11,320 10,386 10,339 14,152 17,203

Account Receivables 5,044 7,539 8,134 6,114 8,660 8,535 11,579 14,075

Cash and Bank Balance 5,977 3,964 6,337 5,554 4,227 6,820 9,212 14,370

Loans and Advances 6,576 7,883 11,765 11,278 12,893 16,817 17,470 21,237

Curr. Liability & Prov. 14,182 15,342 20,825 20,594 21,086 22,634 29,748 36,163

Creditors 7,736 9,709 11,789 9,511 10,554 11,016 15,438 18,767

Other Current Liabilities 3,428 3,411 6,462 8,950 7,526 8,632 10,632 12,924

Provisions 3,018 2,222 2,575 2,133 3,006 2,986 3,678 4,471

Net Current Assets 9,989 12,159 16,372 13,672 15,080 19,876 22,663 30,722

Appl. of Funds 38,791 41,406 52,517 53,800 54,259 59,745 65,472 74,595

E: MOSL Estimates; * Adjusted for treasury stocks

20 May 2015 9

Bharat Forge

Financials and valuations

Ratios Y/E March FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Basic (INR) *

EPS 0.8 13.0 18.0 11.9 19.1 31.5 44.0 62.2

Cash EPS 11.8 23.9 31.0 25.6 34.5 47.1 61.7 81.2

BV/Share 65.7 83.9 93.8 96.9 115.2 147.9 181.1 228.9

DPS 1.0 3.5 4.0 3.4 4.5 7.5 9.0 12.0

Payout (%) -35.5 31.9 25.8 30.7 23.6 27.6 24.6 23.2

Valuation (x) *

P/E 1,637.1 95.4 68.6 104.3 64.7 39.3 28.1 19.9

Cash P/E 105.2 51.7 39.9 48.4 35.9 26.3 20.1 15.2

P/BV 18.8 14.8 13.2 12.8 10.7 8.4 6.8 5.4

EV/Sales 9.2 6.0 4.9 6.0 4.6 4.0 3.2 2.6

EV/EBITDA 90.0 38.6 31.1 39.3 30.1 21.2 15.2 11.5

Dividend Yield (%) 0.1 0.3 0.3 0.3 0.4 0.6 0.7 1.0

Return Ratios (%)

RoE 1.9 17.3 20.0 12.6 18.2 24.0 26.7 30.3

RoCE 3.8 15.8 17.8 11.6 15.4 22.0 27.8 32.9

Working Capital Ratios

Fixed Asset Turnover (x) 0.8 1.1 1.3 0.9 1.2 1.2 1.3 1.5

Inventory (Days) 72 58 64 80 56 49 55 55

Debtor (Days) 54 54 47 43 47 41 45 45

Creditor (Days) 85 70 69 67 57 53 60 60

Working Capital Turnover (Days) 44 59 58 57 59 63 52 52

Leverage Ratio (x)

Debt/Equity 1.5 1.0 1.3 1.3 1.0 0.7 0.5 0.4

* Adjusted for treasury stocks

Consolidated - Cash Flow Statement (INR Million) Y/E March FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Operating PBT -645 4,368 5,995 3,919 7,287 10,784 15,715 21,030

Depreciation 2,451 2,548 3,022 3,360 3,579 3,624 4,118 4,436

Other income 1,148 1,465 2,373 2,624 46 767 1,201 1,436

Direct Taxes Paid -494 -567 -1,710 -1,193 -2,113 -3,594 -5,417 -6,904

(Inc)/Dec in WC 3,210 -4,090 -2,307 -385 -1,629 -2,204 -395 -2,900

CF from Operations 5,670 3,724 7,372 8,326 7,170 9,377 15,221 17,097

EO Expense 0 0 0 -168 -18 387 0 0

CF from Operating incl EO 5,670 3,724 7,372 8,157 7,152 9,765 15,221 17,097

(inc)/dec in FA -2,163 -3,986 -6,903 -5,288 3,968 -6,891 -4,000 -5,500

Free Cash Flow 3,507 -262 469 2,870 11,120 2,874 11,221 11,597

(Pur)/Sale of Investments -2,246 -334 -3,940 2,391 -5,850 3,057 -3,057 0

CF from Investments -4,409 -4,320 -10,843 -2,896 -1,882 -3,834 -7,057 -5,500

Issue of Shares -452 3,884 0 0 -566 2,083 0 0

Inc/(Dec) in Debt 1,880 -3,541 7,902 -454 -3,477 -1,967 -2,000 -2,000

Interest Paid -1,336 -1,487 -1,940 -2,111 -1,701 -1,356 -1,253 -1,081

Dividend Paid -261 -272 -1,343 -949 -1,221 -2,099 -2,519 -3,359

CF from Fin. Activity -168 -1,416 4,619 -3,513 -6,966 -3,339 -5,772 -6,439

Inc/Dec of Cash 1,093 -2,012 1,148 1,748 -1,696 2,592 2,392 5,158

Add: Beginning Balance 4,883 5,977 1,197 2,345 4,093 2,397 4,989 7,381

Closing Balance 5,977 3,964 2,345 4,093 2,397 4,989 7,381 12,539

20 May 2015 10

Bharat Forge

Corporate profile: Bharat Forge

Exhibit 13: Shareholding pattern (%) Mar-15 Dec-14 Mar-14

Promoter 46.7 46.7 46.7

DII 14.0 15.1 14.5

FII 17.7 16.6 16.0

Others 21.6 21.5 22.8

Note: FII Includes depository receipts

Exhibit 14: Top holders Holder Name % Holding

Reliance Capital Trustee Company Limited 2.6

Life Insurance Corporation Of India 2.1

Sudarshan Securities Pvt Ltd 1.4

Gagandeep Credit Capital Pvt Ltd 1.2

Copthall Mauritius Investment Ltd 1.2

Exhibit 15: Top management Name Designation

B N Kalyani Chairman & Managing Director

G K Agarwal Deputy Managing Director

Amit B Kalyani Executive Director

S E Tandale Executive Director

Kishore Saletore CFO

Exhibit 16: Directors Name Name

B N Kalyani Vimal Bhandari*

G K Agarwal Lalita D Gupte*

P G Pawar* P C Bhalerao

S M Thakore* S E Tandale

T Mukherjee* B P Kalyani

Naresh Narad* Amit B Kalyani

P H Ravikumar* Sunil K Chaturvedi

*Independent

Exhibit 17: Auditors

Name Type

S R Batliboi & Co LLP Statutory Dhananjay V Joshi & Associates Cost Auditor

Exhibit 18: MOSL forecast v/s consensus EPS

(INR) MOSL

forecast Consensus

forecast Variation

(%)

FY16 44.0 42.8 2.7

FY17 62.2 56.4 10.2

Company description BHFC, part of USD2.5b Kalyani group, is global leader in forging business having transcontinental presence across India, Germany and Sweden, serving several sectors including automotive, power, oil and gas, construction & mining, locomotive, marine and aerospace.

Exhibit 12: Sensex rebased

20 May 2015 11

Bharat Forge

N O T E S

20 May 2015 12

Bharat Forge

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