Ashish Kacholia portfolio: Nuvama sees 30% upside in Balu Forge shares. Should you buy?

Ashish Kacholia portfolio stock Balu Forge Industries has caught the attention of market watchers after brokerage firm Nuvama Institutional Equities initiated coverage with a ‘Buy’ rating and a price target of ₹790, indicating a 30 per cent upside from current levels. 

The optimistic outlook on Balu Forge shares is driven by the company’s aggressive capacity expansion, strategic entry into defence manufacturing, and efforts to diversify away from the agriculture sector.

Balu Forge’s stock, which is part of ace investor Ashish Kacholia’s portfolio, has already delivered over 100 per cent returns in the last one year. However, after correcting 20 per cent in 2025 and 25 per cent from its October 2024 peak, Nuvama believes the recent dip presents an attractive entry point. 

“As the new capacity comes up, Balu Forge will start selling bigger and heavier machined components. This should drive re-rating of the stock, especially as the sales and EBITDA grow by 30% CAGR,” the brokerage noted in its latest report.

In a bullish scenario, Nuvama estimates the stock could even climb to ₹850, driven by long-term structural growth and improving margins.

Ashish Kacholia held 18.65 lakh Balu Forge shares, representing a 1.66 per cent stake in the company.

Investment Rationale

Strong Capacity Push and Defence Entry Key to Growth: Balu Forge, founded in 1989, has been a dominant player in crankshaft manufacturing for the agriculture industry. However, as per Nuvama, the company is undergoing a strategic transformation to enter high-value verticals such as defence, oil & gas, and industrial segments. The company has ramped up its machining capacity from 18,000 metric tonnes (mt) in FY24 to 32,000mt in FY25 and has plans to scale it further to 80,000mt over the next 12–18 months.

A critical part of this expansion includes a defence production line with the capacity to produce 3.6 lakh artillery shells annually, expected to go live in the first half of FY25. This defence focus, according to Nuvama, is likely to mark a major inflection point for the company.

Capitalising on Supply Chain Shifts: The Russia-Ukraine conflict disrupted the global supply chain of forging components, especially in Europe. Nuvama pointed out that this led to a vacuum in the market, prompting Indian companies like Balu Forge to ramp up production capacity. The company is now positioning itself as India’s second-largest forging player after Bharat Forge.

With its new manufacturing capabilities, Balu Forge can machine components up to three metres in length and weighing up to 1,500 kg—surpassing most domestic peers. “Only Bharat Forge comes close, with a machining limit of 1,250kg. This makes Balu Forge well-positioned to serve the growing needs of sectors like defence and railways,” the brokerage added.

Diversifying Away from Agriculture: Nuvama also highlighted that Balu Forge is working to reduce its dependence on agriculture, which currently contributes 40 per cent of its revenue. The company aims to cut this to 25 per cent by FY28 while boosting its exposure to railways, aerospace, and defence to 25 per cent—up from the current 10 per cent.

This strategic shift into high-margin, capital-intensive segments is expected to reduce revenue volatility and strengthen long-term growth.

Solid Earnings Outlook Through FY28: According to Nuvama, Balu Forge is expected to witness a 30 per cent CAGR in production volumes between FY25–27, thanks to the new capacity coming online. At the same time, average realisations are projected to rise to ₹400–450/kg from the current ₹250–260/kg. These factors combined are expected to drive revenue and EBITDA CAGR of 34 and 35 per cent, respectively, over FY25–28. Net profit is also estimated to grow at a healthy 30 per cent CAGR, despite marginal compression in PAT margins due to increased depreciation and lower other income.

Stock Price Trend

Balu Forge stock has delivered multibagger returns of 106 per cent in the last one year. In May 2025 alone, the stock has surged 25 per cent after a 20 per cent decline in April. It jumped 35 per cent in March, recovering from back-to-back declines of 22 per cent in February and 23 per cent in January.

With strong fundamentals and sectoral tailwinds, the stock appears well-positioned to sustain its upward trajectory in the coming quarters.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.