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BHFC logged a mixed 1Q, with consolidated revenue growth accelerating to 19% yoy (vs 18% in 4QFY26) and EBITDA up 5% yoy. Consolidated EBITDAM fell 190bps qoq to 15.3% (estimate: 15.6%), amid 240bps qoq decline in standalone operations (160bps hit from commodity/energy/logistics costs) and 170bps qoq decline in subsidiary operations (EBITDA loss in the US due to a breakdown). Demand outlook for BHFC remains robust, with a pronounced 2H and margin recovery from 2Q, driven by

1) sustained growth in India CVs

2) healthy momentum in India PVs

3) strong ramp-up in the defense business, led by order execution (ATAGS/QCB Carbine production from 2H; scale-up over 3Y)

4) sustained demand recovery in North American CVs (aging fleet and production rebound)

5) healthy growth in other industrial verticals (expects 2x revenue in Aerospace). Owing to these positives, BHFC expects 20- 25% revenue growth in FY27 for its India manufacturing operations, as it continues to re-evaluate the global footprint given profitability-related challenges in the medium term (part of EU steel production to be transferred to India post-restructuring). We revise FY27E/28E EPS by 4-5% and raise our TP by 14% to Rs2,400 (from Rs2,100 earlier) at 23x Jun-28E EV/EBITDA.

Miss on revenue; higher commodity/energy/logistics costs hit margins

Consolidated revenue rose ~19% yoy. SA revenue was up ~12% yoy. Domestic Auto revenue growth was 3.5% yoy, led by 2%/7% growth in PVs/CVs. Domestic non-auto revenue rose 16% yoy. Exports’ recovery continued, with 12% yoy growth vs -12%/- 21% in 4Q/3QFY26. Consolidated EBITDA rose 5% yoy; EBITDAM was down 190bps qoq on higher staff costs/other expenses. Subsidiary revenue (C-S) was up 27% yoy, with EBITDAM at 5.4% vs 7.1%/8.1% in 4Q/3QFY26. Consolidated PAT was down 5% yoy.

Earnings call KTAs

1) BHFC expects FY27 to be a strong year (2H more robust), with FY28 also strong, driven by growth capex and new businesses.

2) It plans organic capex of ~Rs18bn in India for FY27 (a fundraise of up to Rs25bn is planned for growth capex in large engines, power generation, semiconductor components, aerospace, and an energetics plant in AP).

3) BHFC secured new orders of Rs13.5bn in 1Q, including Rs6.8bn for Defense (order book: Rs112bn vs Rs110bn as of Mar-26).

4) The defense business targets a steadystate annual margin of 22-23%, while aerospace is expected to double its current Rs4bn revenue in 2Y.

5) The Odisha mega-site project (large aerospace components, multimodal facilities) faces delays on time-consuming local, central, and forest environmental clearances.

6) 1QFY27 faced manpower challenges, from the Iran war and LPG crisis, which sent contract/migrant labor home, impacting sub-suppliers and steel companies. Manpower is at 70-75% of normalcy, with some yet to return.

7) The restructuring of Bharat Forge CDP (steel business, Germany) includes a non-cash Rs30mn manpower-redundancy impact, with the entity ceasing to exist by end-CY27; part of operations to shift to India.

8) The India/NA outlook is very strong, Europe CV is strong, and PV neither strong nor weak.

9) Consumer demand for infrastructure-based assets in India is rising sharply, however, US tariffs on raw aluminum (50% from Canada) pose a challenge to achieving targeted margins

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