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Bharat Forge shares fall 4%; CLSA downgrades rating, cuts target price

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Bharat Forge share price: The company's stock dropped over 4 percent after foreign brokerage firm CLSA downgraded its rating on shares of Bharat Forge to ‘sell’ from ‘buy’ and cut its target price by a whopping 23 percent. CLSA expects consensus earnings downgrades based on slowing export growth.

Bharat Forge shares fell over 4 percent on Wednesday after foreign brokerage firm CLSA downgraded its rating on the forging company’s stock and cut its target price by a whopping 23 percent.
CLSA downgraded its rating on Bharat Forge shares to ‘sell’ from ‘buy’ and slashed its target price to Rs 690 from Rs 900.
At 9:48 am, shares of the forging company were trading 1.8 percent lower at Rs 755.95 on BSE. The stock has fallen after two days of consecutive gain and touched an intraday low at Rs 736 on BSE.
“Bharat Forge valuations are overly high and do not factor in a likely exports slowdown,” said CLSA in a note to clients.
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Further, the brokerage firm believes that 44 percent of Bharat Forge’s revenue is linked to the diesel truck and oil and gas segments which could be hindered by a shift to electric vehicles and renewables.
CLSA expects consensus earnings downgrades based on slowing export growth.
“The stock is trading at 28x PE on Dec-23CL consolidated earnings, an 8 percent premium to the historical average. We believe valuations will revert to mean levels as revenue growth slows due to muted exports growth. In addition, we believe valuations do not factor in disruption risk as the world moves to cleaner fuels and vehicles,” CLSA said.
However, Bharat Forge is trading higher than 5, 20, 50, 100 and 200-day moving averages which indicated a largely positive momentum in the stock.
In the past year, the stock has gained over 20 percent.
Bharat Forge is a Pune based company that manufactures an extensive array of critical and safety components for several sectors including Automobiles (across Commercial & Passenger Vehicle), Oil & Gas, Aerospace, Locomotives, Marine, Energy (across renewable and non-renewable sources), Construction, Mining and General Engineering.
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