Forge of Bharath | Bharat Forge Share Price: Staying Away From Metal Stocks, Especially Steel Stocks: Sandip Sabharwal
What’s your take on Tata Steel given the debt reduction and the cash flow is also going to be great. SAIL can be a trade on the steel cycle, JSW can be a game on the steel cycle, but with Tata Steel, we get all this debt reduction stuff and Corus’ baggage goes back.
Debt reduction is largely in the price now. The title will move according to the underlying prices of steel. My take is that no commodities super cycle is going to happen as it all comes down to China again, which people don’t understand. About 50-60% of the consumption of all products comes from China. The United States could offer any type of infrastructure, but the actual implementation will have to be seen. Even then, the additional demand they’ve generated won’t be able to offset the kind of decline we’re going to see in China.
Steel has therefore experienced a bullish cycle. 2022 will be difficult for commodities. It will not be an easy year for commodities as liquidity will disappear, speculative money will come out and China will slow down considerably. People should be wary of metal stocks, especially steel stocks. I don’t think there is a short term buying opportunity.
The focus is again on some of the automotive auxiliary names like a Sona BLW etc. as the news is that even those traditional players like Toyota or Ford are gradually focusing their business models on EV games. Should that bode well for some of those globally linked auto helper names?
There are two sides to this. First, overall automobile demand was reduced last year. After a recovery, we are seeing significant month-over-month declines in auto sales not only in Europe but also in China. The overall pie is shrinking and given what is happening in China and given that China has been a major contributor to the increase in auto sales in recent years, overall auto sales will remain a challenge.
Now we could understand a story that on the other hand, because of electric vehicles, some component manufacturers might benefit from it, but it is somewhere in terms of technology and investment. These companies will also have to make new investments. There is a one-to-one correlation. I would still think for the auto industry the short term might be tough and to that extent I don’t really see a big story in auto accessories at this point.
is somewhat different because it has other verticals like defense and aerospace verticals and other areas that it has entered. So, Bharat Forge is definitely a stock that people should have on their trail and slowly build up because it has a solid long term outlook.
Is it a good idea to buy? It’s in the experiential bike segment, the 350cc plus segment – and I doubt an electrical disruption will happen in this space anytime soon?
There is no power outage and they seem to have their house in order and some of their models have started to do well. They started to surprise on the rise, unlike other manufacturers of two-wheelers or automobiles who were not surprising on the rise. In fact, the surprise has been on the decline.
This month’s numbers for Eicher Motors were pretty strong and it looks like an opportunity for value investors. From there, the stock has the potential to yield decent returns.