A moderation in truck sales in the domestic as well as overseas markets could weigh on the medium-term earnings growth of Bharat Forge, a supplier of forging components to vehicle manufacturers. The segment accounts for nearly 45 per cent of the revenue for the Pune-headquartered company.
The Indian and US truck markets appear to be reaching the crescendo of an upcycle. Historical data suggest that average upcycle in the medium and heavy commercial vehicle segment is around four-and-a half years in India and about half that in the US.
The current upcycle in the MHCV segment in India is already in the fifth year and seen tonnage growth of 21 per cent annually. Analysts are penciling in volume to grow 5-6 per cent in the fiscal year starting April 2019, mainly due to an expected pre-buying boost in the second half, before prices increase due to the introduction of new emission rules in April 2020 — prices are expected to go up by 10-15 per cent.
The company’s management is expecting its share of components per vehicle to increase after the implementation of new emission rules. However, the Street is likely to remain conservative till the result starts showing up.