M M Forgings LtdQ1 FY24Auto Components

M M Forgings Ltd

Q1 FY24 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 1

Fundraise

Yes

Order

Yes

Capex

Yes

4 of 5 growth signals are positive — a strong management growth story.

Revenue guidance

Category 3

→FY24 production achieved around 85,000 tons; sales at 77,000 tons.
→FY25 production target: 92,000 to 95,000 tons.
→Sales growth expectation for FY25: around 10%-12%.
→Export volume growth expected at about 10% for the coming year.
→Domestic market growth projected at 5%-7%, with an additional 3% market share gain, primarily in the second half.
→Anticipated sales turnover growth: aiming for double-digit percentage growth (~10%).
→Investment of INR 500 crores planned over next 12-14 months to support capacity expansion and growth.
→Inventory reduction target: INR 50 crores to 100 crores aimed to improve working capital and sales.
→Margin expansion expected to cross 20% by Q3/Q4 calendar year, supporting healthy profitability with volume growth.

Category 1

→MM Forgings expects a 10%-12% overall growth in sales for the current year, driven by both domestic and export markets.
→EBITDA margins improved to 19.4% in FY24; management targets crossing the 20% mark by Q3/Q4 of the current fiscal year and maintaining early 20s margins thereafter.
→Operating efficiencies and cost compression (in cutting tools, manpower, electricity) alongside value-added products expansion are expected to enhance margins further.
→Export growth remains strong, supported by global customers shifting away from China, fueling order upticks especially in Europe and the Americas.
→Investments totaling around INR500 crores planned over next 12-14 months will expand capacity and support higher growth, targeting tonnage increase from ~85,000 tons in FY24 to 92,000-95,000 tons in FY25.
→Management aims to scale the EV powertrain business to INR1,000-2,000 crores turnover over the next decade, contributing to future profit growth.
→Interest costs will rise moderately but margin outlook remains positive despite this headwind.

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Yes

→MM Forgings plans a total capital expenditure of INR 500 crores over the next 12 to 24 months.
→Of this, approximately INR 300 crores will be funded through internal accruals (equity).
→The remaining INR 200 crores will be financed by additional borrowings (debt).
→No mention of fresh equity fundraising beyond utilizing internal accruals.
→The company aims to maintain a dividend payout policy of around 15%-20% of profits, subject to board approval and urgent requirements.
→This funding mix supports capacity expansion, including investments in forging, machining, and electrical/EV components.

Yes

→MM Forgings has reported new orders across its three major export geographies (North America, Europe, South America), contributing to growth.
→There is strong order inflow driven by customers' China-plus-one strategy, especially from European customers looking to diversify away from China.
→Export growth of 10-15% is expected, supported by new orders despite some industry slowdown.
→Domestic market growth is projected around 10%, with 3% estimated market share gains in various product categories.
→Production targets for FY25 are between 92,000 to 95,000 tons, up from 85,000 tons produced in FY24.
→Sales volume for FY24 was around 77,000 tons; volume growth of approximately 10% is anticipated for the coming year.
→The company is actively working on launching new products in segments like heavy presses, beams, knuckles, and crankshafts to boost order book and presence.

Yes

→MM Forgings plans a capex of around INR 500 crores over the next 12 to 24 months.
→INR 425 crores allocated to core forging: about INR 250 crores for machining and INR 100-150 crores for forging capacity expansion.
→INR 75 crores is targeted towards electrical segment (Abhinava Rizel).
→INR 400 crores of the capex expected to be spent within FY25, mainly on machining, forging, and EV motor facilities.
→About INR 75 crores spent so far in FY24 for Abhinava Rizel, mainly on infra and testing facilities for PMSM motors.
→Revenue potential from Abhinava Rizel capex is around INR 100 crores initially, aiming for higher growth later.
→Funding mix: INR 300 crores from internal accruals and INR 200 crores via additional borrowings.
→Plans to invest in green power (wind and solar) in the near future to mitigate rising power costs.

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