Bharat Forge: revenue up 20.8% but profit down as margin contracts 3.2 pp

Bharat Forge reported revenue of INR 48.7 bn for the second quarter of fiscal 2027 (July-September 2026), up 20.8% year-on-year. EBITDA grew only 0.9% to INR 7.8 bn, while net profit fell 7.8% to INR 2.8 bn. Revenue growth accelerated from 18.7% in the prior quarter, but the EBITDA margin contracted from 19.3% to 16.1% and the net margin from 7.4% to 5.7%. Our conclusion: the share is fairly valued – the portal model implies only +5% upside, consistent with a neutral rating. Our view: the share is fairly valued; upside on the portal model +5%.

Our view: is there upside

Our view in numbers

Key takeaways

— Revenue grew 20.8% year-on-year, accelerating from 18.7% in the prior quarter

— EBITDA added only 0.9% as the margin contracted from 19.3% to 16.1%

— Net profit fell 7.8% to INR 2.8 bn, despite a loss in the prior quarter

— Net debt fell from INR 60.3 bn at end-March 2026 to INR 47.1 bn at end-September 2026

— Net debt/EBITDA LTM stands at 1.54 – a moderate leverage level

— EV/EBITDA LTM of 30.0 is 10% above its own 3-year average of 27.1 – the share is more expensive than its history

— Trailing 12-month dividend yield is only 0.49% – the payout is immaterial for returns

Key figures, INR bn

Revenue grew 20.8% year-on-year, accelerating from 18.7% in the prior quarter

Revenue for the second quarter of fiscal 2027 (July-September 2026) came in at INR 48.7 bn, up 20.8% year-on-year. Growth accelerated from 18.7% in the prior quarter. This is the second consecutive quarter of acceleration: growth was 18.7% in Q1 FY2027 and 20.9% in Q4 FY2026.

The acceleration in revenue is the main positive of the report. However, it comes with a decline in profitability, suggesting that growth is being driven by lower-margin orders or rising costs. Without a segment breakdown in the provided data, it is impossible to say which factor dominates.

EBITDA added only 0.9% as the margin contracted from 19.3% to 16.1%

EBITDA for the reported quarter was INR 7.8 bn, up only 0.9% year-on-year. With revenue growing 20.8%, the EBITDA margin fell from 19.3% to 16.1% – a contraction of 3.2 percentage points. This is a significant deterioration that outweighs the benefit of revenue growth.

Operating profit was INR 5.0 bn. The margin contraction could be due to higher material or labour costs, or a shift in revenue mix towards lower-margin segments. The provided data does not break down costs, so the exact cause cannot be identified. However, the fact of margin contraction alongside accelerating revenue is a warning sign for the quality of growth.

Net profit fell 7.8% to INR 2.8 bn, despite a loss in the prior quarter

Net profit for the second quarter of fiscal 2027 was INR 2.8 bn, down 7.8% year-on-year. The decline in profit despite revenue growth is explained by margin contraction. The net margin fell from 7.4% to 5.7%.

It is important to note that in the prior quarter (Q1 FY2027) the company posted a loss of INR 0.9 bn. Thus, the return to profit is a positive shift, but in year-on-year terms profit is still lower. The loss in the prior quarter may have been one-off, but without additional data its nature cannot be established.

Net debt fell from INR 60.3 bn at end-March 2026 to INR 47.1 bn at end-September 2026

Net debt as of 30 September 2026 was INR 47.1 bn. Since 31 March 2026 it has fallen from INR 60.3 bn – a decrease of INR 13.1 bn. Over the last 12 months net debt also declined: from INR 54.3 bn on 30 September 2025 to INR 47.1 bn, a decrease of INR 7.2 bn.

The reduction in debt is a positive factor for the balance sheet. However, the provided data does not include a cash flow statement, so it is impossible to say whether the decline came from operating cash flow or asset sales. The net debt/EBITDA LTM ratio stands at 1.54, corresponding to moderate leverage.

Net debt/EBITDA LTM stands at 1.54 – a moderate leverage level

The ratio of net debt to trailing 12-month EBITDA is 1.54. This is a moderate level: debt is covered by EBITDA within about one and a half years. For an industrial company this is an acceptable burden that does not create immediate risks to financial stability.

It should be emphasised that the provided data does not include a prior value for this ratio, so it cannot be stated whether leverage rose or fell. Only the current level can be noted. The reduction in absolute net debt from INR 60.3 bn in March 2026 to INR 47.1 bn in September 2026 is a fact, but it may have been partly offset by EBITDA growth.

EV/EBITDA LTM of 30.0 is 10% above its own 3-year average of 27.1 – the share is more expensive than its history

The EV/EBITDA LTM multiple is 30.0, which is 10% above its own 3-year average of 27.1. This means the share is trading more expensively than is typical over the last three years. For a company with a contracting margin and declining profit, such a premium to its own history looks unjustified.

P/E LTM is 125.1 – a very high level reflecting low trailing 12-month profit. However, P/E is less informative for a company with volatile earnings. The main conclusion: on EV/EBITDA the share is more expensive than its history, which limits upside potential.

Trailing 12-month dividend yield is only 0.49% – the payout is immaterial for returns

The trailing 12-month dividend yield is 0.49%. This is a very low level that does not play a significant role in the total return of the share. For comparison, the key rate in India is significantly higher, making Bharat Forge's dividend yield uncompetitive for income-oriented investors.

The low dividend yield may be explained by the high share price relative to payouts or by a conservative dividend policy. The provided data does not include information on dividend per share or payout ratio, so it is impossible to assess what portion of profit the company allocates to dividends. However, the fact that the yield is below 1% indicates that the dividend is not an argument in favour of the investment.

Valuation on the latest reported figures

Bottom line

Bharat Forge showed accelerating revenue growth of 20.8%, which is the strong point of the report. However, growth is accompanied by margin contraction and declining profit, which calls into question the quality of that growth. The reduction in net debt to INR 47.1 bn and moderate leverage of 1.54x EBITDA support the balance sheet. The key question for a holder is whether the company can restore margins or whether growth will remain low-margin. Our conclusion: the share is fairly valued – the portal model implies +5% upside, consistent with a neutral rating. Our view: the share is fairly valued; upside on the portal model +5%.