BHARATFORG

Transitions Beyond Auto Forgings

reported a mixed Q3FY26 performance, with domestic commercial vehicle (CV) revenues rising 14.7% YoY but export CV revenues plunging 50.7% YoY due to North American de-stocking and elevated tariffs. Passenger vehicle (PV) revenues grew modestly, while margins narrowed on product mix and tariff pressures. The company is entering a structural transition, with defence and aerospace emerging as core growth pillars, supported by a strong order book and policy tailwinds. Automotive Business - Domestic CV revenues: +14.7% YoY, supported by steady truck demand. - Export CV revenues: -50.7% YoY, North America truck revenues down 51% YoY. - Domestic PV revenues: +3.8% YoY, driven by premium utility vehicles and new OEM programmes. - Export PV revenues: +7% YoY. - EBITDA margin: 27.3%, down 79 bps YoY, impacted by tariffs and product mix. Export Challenges & Relief - US accounts for 59% of exports; tariffs previously at 25%. - India–US trade agreement expected to reduce tariffs to ~18%, providing partial relief. - Signs of recovery in US CV market with improving order inflows. Defence & Aerospace Growth - Defence orders in Q3: ₹1,878 crore, total order book at ₹11,130 crore. - Key contracts: CQB carbine (250,000 units) and ATAGS artillery programme (execution from H2 FY27). - Defence revenue share: ~10% currently, expected to rise to 18–20% by 2030. - Aerospace revenue: ₹250 crore in FY25, expected to exceed ₹350 crore in FY26, with sustained growth outlook. - Defence and aerospace provide multi-year visibility, higher margins, and non-cyclical demand. Valuation & Outlook - Stock at ₹1,727, trades at 37.9x FY28E earnings. - Long-term drivers intact: defence, aerospace, resilient forging business. - Near-term challenges: European steel restructuring, export weakness. - Recommendation: Accumulate on corrections, given elevated valuations but strong structural growth trajectory.