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BHARATFORG

’s Stock Rally Fully Priced In?

. has emerged as the standout performer in the Nifty Auto index in 2026, with its stock surging nearly 27% YTD to an all-time high of ₹1,935.50. In contrast, Ashok Leyland gained just 4% while the broader auto index fell 8%. The rally has been driven by the Indo-US trade deal that slashed tariffs on Indian imports, alongside a strengthening commercial vehicle (CV) cycle in both India and North America. However, risks in non-auto businesses and technological shifts in CVs raise questions about whether the rally has already priced in most positives. Key Drivers of Rally - US tariff relief: Tariffs cut from 50% to 18% (potentially 15% for 150 days), easing pressure on exports. - Bharat Forge absorbed a ₹69 crore hit in 9MFY26 due to tariffs; PBT stood at ₹1,211 crore. - Export revenue from the US declined 28% YoY to ₹1,809 crore amid destocking and uncertainty. - North America CV recovery: Class 8 truck orders surged to 47,200 units in Feb 2026, +159% YoY, +47% MoM. Business Mix & Risks - Domestic auto sales and exports to contribute 47% of FY26 standalone revenues, down from 53% in FY24. - Non-auto businesses (clients like Volvo, Daimler, Cummins) face revenue pressure. - Risk of demand shift from ICE trucks to electric trucks could reduce forging component demand. Valuation & Outlook - Nomura projects FY28 EBITDA at ₹4,541 crore, +55% over FY26. - Stock corrected ~3% to ₹1,862.30 amid market weakness, already above Nomura’s target price of ₹1,844 (EV/EBITDA multiple of 20x FY28). - While CV upcycles in India and North America provide twin growth engines, non-auto weakness and EV transition risks temper long-term optimism. - The rally reflects tariff relief and cyclical tailwinds, but upside from here may be capped unless non-auto businesses recover and EV risks are mitigated.