Bharat Forge Q2 Shockwave: Defence Boom Masks Export Woes! Recovery Imminent?

Bharat Forge announced a mixed financial performance for the second quarter of the fiscal year 2026 (Q2 FY26). The company's standalone revenue saw a 13% year-on-year decrease, falling below market expectations. However, its EBITDA margin of 28% exceeded estimates, supported by lower raw material costs. Net profit declined by 14% year-on-year. Overseas subsidiary margins were modest at 3.8%.

Nomura analysts noted that the defence business is crucial in offsetting weakness in exports. The company secured new orders worth ₹1,500 crore in the first half of FY26, with a defence order book of ₹9,400 crore. The consolidation of American Axle's operations is expected to aid expansion into SUV and light commercial vehicle segments. Nomura maintains a 'Neutral' rating with a target price of ₹1,553, anticipating an export cycle recovery by the second half of FY27.

Nuvama Institutional Equities reported a 9% year-on-year rise in consolidated revenue and a 12% growth in EBITDA, beating estimates. Losses from subsidiaries significantly narrowed. They project consolidated revenue and EBITDA CAGR at 8% and 10% respectively, driven by Indian subsidiaries, and retained a 'Hold' rating with a target price of ₹1,350.

Emkay Global highlighted steady consolidated revenue growth of 9% and EBITDA growth of 12%, with margins improving sequentially. They believe Q2 marked the trough of the current downcycle and expect gradual recovery from Q4 FY26. Emkay raised its target price to ₹1,450 with an 'Add' rating.

Motilal Oswal Financial Services found standalone earnings in line, with margins driven by strong cost control. They identified defence, aerospace, and JSA Autocast as key growth drivers, raising FY26-27 earnings estimates by 7% post the K-Drive Mobility acquisition, reiterating a 'Neutral' rating with a target price of ₹1,286.

Impact: This news is significant for Bharat Forge investors and the Indian auto ancillary and defence sectors. It signals potential recovery and growth drivers amidst global economic uncertainties. The company's performance provides insights into manufacturing cycles and export market dynamics. Rating: 7/10

Difficult terms: Q2 FY26: The second quarter of the financial year 2025-2026 (April-June 2025). EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure of operational profitability. Y-o-Y: Year-on-Year, comparing the current period's performance to the same period in the previous year. Consolidated Revenue/EBITDA: The combined financial performance of the parent company and all its subsidiaries. Standalone Revenue/EBITDA: The financial performance of the parent company only, excluding subsidiaries. Brokerage: A financial services firm that provides research and advice to investors. CV: Commercial Vehicle. EPS: Earnings Per Share, the portion of a company's profit allocated to each outstanding share. CAGR: Compound Annual Growth Rate, the average annual growth rate over a specified period. Destocking: The process of reducing inventory levels. Trade barriers/tariffs: Taxes or restrictions imposed on imported goods by governments.