Future growth expectations in sales/revenue/volumes?

Sales volume guidance for FY23 is projected between 80,000 to 90,000 tons, with a likely achievement around 80,000 to 85,000 tons. Current production is on track (72,000 tons if annualized from Q1), expected to increase with better utilization. Capex of approximately INR 250-300 crore planned in FY23, primarily towards machining (two-thirds) and forging (one-third), which is expected to enhance capacity and revenue from FY24 onwards. EBITDA per ton is expected to improve or at least defend current margins due to increased machining mix (currently 52%, expected to rise to 60-65% over 18 months)

Future growth expectations in earnings/operating earnings/profits/EPS?

Production guidance for FY23 is maintained at 80,000 to 90,000 tons, slightly conservative considering possible tepid Q2-Q4. EBITDA per ton for Q1 was INR33,700, expected to possibly increase to INR35,000 or more. Margins likely steady around 18.5%-20%, with machining mix increasing from 52% to 60-65% in 18 months, expected to defend or improve margins. Capex of INR250-300 crore planned in FY23, mainly for machining, with incremental revenue benefits primarily from FY24. Domestic market growth strong, expected to offset export weakness; export revenues declined 6% YoY in Q1; domestic sales up

Current/ Expected Orderbook/ Pending Orders?

Demand in the U.S. has slowed down, impacting the order book for commercial vehicle (CV) parts. The previously large backlog of orders in the classic segment in the U.S. is starting to clear. New orders' pace has reduced, reflecting the general slowdown. Despite a slowdown in some export markets (notably Europe), the domestic Indian market remains strong with growing customer demand. The company expects to produce and sell around 80,000 tons in FY ’23, with some conservatism due to macroeconomic uncertainties. The ongoing increase in machining capacity and development of new parts supports a p

Any current/future new fundraising through debt or equity?

As of August 2022, M. M. Forgings Limited had a gross debt of about INR 430 crore. They expect to end the fiscal year with gross debt around INR 550 crore. The company plans to spend around INR 250-300 crore on capex in FY ’23. There is no explicit mention of new fundraising through equity. The increase in debt from INR 430 crore to INR 550 crore is likely to support the capex plans. No specific plans or announcements about raising additional debt or equity beyond this are stated in the transcript.

Any current/future capex/capital investment/strategic investment?

FY23 capex planned around INR 250-300 crore (lower than earlier INR 400 crore estimate). Two-thirds of capex to machining, one-third to forging, with some investment in electrical segment (~INR 15 crore). INR 48 crore already spent in Q1 FY23; remaining to be spent during the year. 6,300-ton press recently commissioned, increasing nameplate capacity from 100,000 to 120,000 tons, targeting 130,000 tons by year-end. Machining mix expected to rise from 52% to 60-65% over next 18 months, potentially improving EBITDA margins. Plans to diversify in electrical motor segment, including alternators and

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M M Forgings LtdQ2 FY22Auto Components

M M Forgings Ltd Q2 FY22 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹461P/E: 24.9Market Cap: ₹2.2K CrSector: Auto Components

Management growth scorecard

Revenue

Category 3

Margin

Category 2

Fundraise

Yes

Order

Capex

Yes

2 of 5 growth signals are positive.

Full analysis

Revenue guidance

Category 3

→Sales volume guidance for FY23 is projected between 80,000 to 90,000 tons, with a likely achievement around 80,000 to 85,000 tons.
→Current production is on track (72,000 tons if annualized from Q1), expected to increase with better utilization.
→Capex of approximately INR 250-300 crore planned in FY23, primarily towards machining (two-thirds) and forging (one-third), which is expected to enhance capacity and revenue from FY24 onwards.
→EBITDA per ton is expected to improve or at least defend current margins due to increased machining mix (currently 52%, expected to rise to 60-65% over 18 months).
→Domestic market is strong and expected to outperform exports; commercial vehicle and passenger vehicle segments are showing growth.
→The company remains positive despite some macroeconomic uncertainties, emphasizing strong demand, especially in India.
→Long-term growth anticipated from diversification into EV markets and electrical components, with plans to reveal more details soon.

Margin guidance

Category 2

→Production guidance for FY23 is maintained at 80,000 to 90,000 tons, slightly conservative considering possible tepid Q2-Q4.
→EBITDA per ton for Q1 was INR33,700, expected to possibly increase to INR35,000 or more.
→Margins likely steady around 18.5%-20%, with machining mix increasing from 52% to 60-65% in 18 months, expected to defend or improve margins.
→Capex of INR250-300 crore planned in FY23, mainly for machining, with incremental revenue benefits primarily from FY24.
→Domestic market growth strong, expected to offset export weakness; export revenues declined 6% YoY in Q1; domestic sales up ~100%.
→Anticipate steady improvement in operating leverage and margin gains driven by higher value-added parts and scale.
→Positive long-term outlook on EV market entry, targeting INR500 crore+ revenue over the next 7 years.
→Overall optimistic on earnings growth, contingent on stable macroeconomic conditions and execution of growth initiatives.

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Fundraise plans

Yes

→As of August 2022, M. M. Forgings Limited had a gross debt of about INR 430 crore.
→They expect to end the fiscal year with gross debt around INR 550 crore.
→The company plans to spend around INR 250-300 crore on capex in FY ’23.
→There is no explicit mention of new fundraising through equity.
→The increase in debt from INR 430 crore to INR 550 crore is likely to support the capex plans.
→No specific plans or announcements about raising additional debt or equity beyond this are stated in the transcript.

Order book

→Demand in the U.S. has slowed down, impacting the order book for commercial vehicle (CV) parts.
→The previously large backlog of orders in the classic segment in the U.S. is starting to clear.
→New orders' pace has reduced, reflecting the general slowdown.
→Despite a slowdown in some export markets (notably Europe), the domestic Indian market remains strong with growing customer demand.
→The company expects to produce and sell around 80,000 tons in FY ’23, with some conservatism due to macroeconomic uncertainties.
→The ongoing increase in machining capacity and development of new parts supports a positive outlook on future orders.
→Export demand is down about 6% year-on-year, while domestic sales have nearly doubled.
→Overall, the company remains positive but cautiously balanced between positives and external risks.

Capex plans

Yes

→FY23 capex planned around INR 250-300 crore (lower than earlier INR 400 crore estimate).
→Two-thirds of capex to machining, one-third to forging, with some investment in electrical segment (~INR 15 crore).
→INR 48 crore already spent in Q1 FY23; remaining to be spent during the year.
→6,300-ton press recently commissioned, increasing nameplate capacity from 100,000 to 120,000 tons, targeting 130,000 tons by year-end.
→Machining mix expected to rise from 52% to 60-65% over next 18 months, potentially improving EBITDA margins.
→Plans to diversify in electrical motor segment, including alternators and non-auto motors, with ongoing development of EV product portfolio (detailed info expected in coming weeks).
→Debt expected to increase from INR 430 crore to around INR 550 crore by year-end to fund capex.
→No immediate inorganic capex plans disclosed.

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