Analyst Meet / AGM - Analyst Meet
FY 2016 revenues can be flat, but a number of growth initiatives are in place for faster growth in future
Bharat Forge held its analyst meet in Mumbai on 8 Dec 2015. Baba Kalyani, Chairman of the company and Amit Kalyani, Executive Director of the company addressed the meet.
Highlights of the feel
According to DB report, Heavy truck production in overseas market stood at 508000 in the year 2014, which grew to 610000 in the year 2015. This is expected to fall by 6% to 579000 in the year 2016.
Even though the truck business is expected to fall 6% in 2016 in overseas markets, the company's customers like Daimler, Volvo, DAF etc will increase their market share which means the company will also increase its market share.
Commercial vehicles outlook is positive in India and Europe.
Passenger Vehicle (high end) outlook is positive in North America and Europe.
Passenger Vehicle (mass segment) outlook is positive in India and North America.
Oil and Gas outlook is negative in North America and Europe.
Mining outlook is positive in India but negative in North America and Europe.
Outlook for Aerospace is positive in North America and Europe.
Power and transmission outlook is positive in India and North America.
For 2016 the company sees increased volatility and sharp volume drop in commodity and allied businesses (i.e oil and gas, mining etc)
In this background the company hopes to maintain its revenues in FY 2016 driven by ramp up of passenger vehicles and market share gains in North American truck business and pick up in Indian business along with gains in market share.
The company is focusing on adding new products in new sectors and new customers.
The company is developing new products across Passenger vehicles, commercial vehicle and industrial sectors.
The company has filed 16 patents and has already been granted 2 patents. Others are awaiting examination. Many more are in pipe line.
The company has adopted the following sales enhancement strategies:
In cars: The company will add new customers, develop new products. It will add value addition to its business from just forging to machining.
In trucks segments the company will develop new products and increase market share.
In locomotive business the company has complete approval for few components and trial orders for new products are expected soon.
In oil & Gas business the company is preparing itself for the next upturn and has accordingly developed strong customer alignment. It has also identified new areas of business. The company will also add value to its current product basket.
In renewable business there is focus globally. The company will focus on value addition in wind, hydro etc.
Derivative of make in India is to focus on import substitution. For the same the company has identified four sectors namely Mining, Power, Railways and Marine and Defence. In this regard the company has made significant progress in last six months to develop products and get initial orders. In Defence the company pursues opportunities in Components, Artillery program and DRDO program.
For Railways the company is the main supplier for diesel locomotives, turbochargers, gears and crankshafts.
Transmission business in cars, trucks is bigger than traditional business. The company sees transmission business to be 10 times bigger than the forging and crankshaft business. For this business the company has started getting customers and will start supply next tear by March (2016).
The company has high quality heat treatment metallurgical asset being bought in group (not Bharat Forge) for transmission related business. This was present in India since many yrs in name of Bodycoat. It is doing high quality work in aerospace, automotive, industrial and medical implants
The company hopes to soon announce major contracts with major aerospace customer.
Hindustan Aeronautics (HAL) alone imports 1000 crore of forgings. Thus the company sees opportunities under Make In India push in aerospace, defence and mining business.
The company does not have any plans to have tie ups in transmission business as OPM will fall to 10-12% if the company enters into technology tie ups. The company has its own superior technology for the transmission business.
Bharat Forge is the only company in India (apart from government companies) that can make full artillery platform. The company is currently running for 4 artillery programs and expects to get 1-2 of those. Even if gets 1, will be 2-3 bln USD order and will run for 15-20 years.
Passenger vehicle business will rise to 15% of sales in 18 months time as the company increases its focus in India, Europe and North America markets.
Higher inventory in overseas truck business will end in March 2016 (it will fall from 3.5 months to 2 months) and after that normal production is expected to resume.
In forging Bharat Forge is the only company that Boeing is working with.
The company supplier to GE in US for locomotive. It will benefit from GE orders in India.
OPM is expected to be in the range of 29-31% for its Indian business and in the range of 10-12% for its overseas subsidiaries.
Overseas subsidiaries should do well in the year 2016.
For 2018:
The company targets RoCE and RoNW in excess of 20%.
To become net debt free
Targets sales turnover of Rs 7000 crore. Picture regarding this will be more clear in few months but the company is working hard to achieve the same.
And stable OPM in the current range
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