Bharat Forge - No Surprises

Bharat Forge reported good Q2FY2007 results though the consolidated margins are still under pressure

* Bharat Forge's stand-alone net sales for Q2FY2007 have grown by 19.7% to Rs486.7 crore, with the domestic revenues rising by 18% and the exports going up by 22.6%.

* An improved product mix, progressive ramp-up in the forging capacity and higher machining contribution led to a 30-basis-point improvement in the operating profit margin (OPM) to 26.1% as the operating profit for the quarter grew by 21.1% to Rs117.7 crore.

* The net profit for the quarter rose by 20.1% to Rs62.2 crore due to higher interest costs and depreciation on account of the capacity expansions done by the company.

* On a consolidated basis, the company's net sales grew by 41.4% to Rs970.9 crore. The OPM declined by 240 basis points year on year (yoy) to 16.6% but improved sequentially as the operating profit for the quarter rose by 23.7% to Rs160.7 crore. The consolidated profit after tax (PAT) for the quarter grew by 21.4% to Rs74.2 crore.

* The company is also in the process of finalising four major long-term contracts, with the value of each contract being in excess of USD50 million per year. The contracts are expected to be signed by March 2007.