BHARAT GEARS LTD - BUY

Bharat Gears Ltd(BGL) is one of the largest Gear manufacturer in India.This company was originally promoted by Raunaq and company in 1971.Company is operating with three business divisions- Gears,Furnaces and Automotive components. Now BGL having two manufacturing facilities and planning to add one more in Maharastra. BGL’s total gear manufacturing capacity is divided as 6 lac units of Hypoid Ring Gear & Pinion ,10 Lac Differential Gears & Crosses and 22 lac  Transmission Gears .It is one of the major suppliers of gears to tractor industry with customers like Escorts,John Deere,M&M TAFE,Carraro..etc . In the non farm segments BGL’s customer list includes Ashok Leyland,Tata Motors,JCB,Toyota Kirloskar ..etc .In addition to gear business BGL also in heat-treating furnace systems with  technical collaboration of  AFC-Holcroft of USA. Out of the total sales ,about 90% is coming from Gear segment.Company supplying 80% of its gears to OEM’s and  selling the rest in replacement market.After a long period of slow growth now company is moving with pace.BGL already crossed the last full year profit figures in just 9 months of this FY even excluding other income.Normally fourth quarter figures are the best for the company .Based on the prediction  of normal monsoon for this year also tractor demand is expected to improve .This will positively impact company’s sales .In addition to this, benefits from the capacity expansion and  sales from new manufacturing facility will add to its bottom line in next few years.Increase in raw material cost is a factor to watch .Considering all these factors ,BGL is expected to post a Sales around Rs.430 Cr and a net profit of Rs.15 Cr in this FY.It may post an EPS around Rs.20/- .At current market price of Rs.80/- BGL is trading with a market capitalization of just 62 Cr which is very low for a market leader with turnover of more than Rs.400 cr. BUY BGL  at CMP of Rs.80/- which is trading both in NSE and BSE.