Happy Forgings Limited — Q1 FY26 earnings call

Call held 11 Aug 2025

Management summary

Happy Forgings delivered a resilient Q1 FY26 with 3.6% YoY revenue growth to ₹354 crores and strong EBITDA margins of 28.6%. This performance was supported by new business wins in farm equipment, wind, and industrial sectors, offsetting declines in export-oriented CV and off-highway segments. The company is confident in sustaining margins and continues with its CAPEX plans for capacity expansion and diversification, despite ongoing global market uncertainties and tariff-related headwinds.

Highlights

  • Revenue of ₹354 crores, up 3.6% YoY, driven by new business segments and onboarding.

  • EBITDA margin at 28.6% and gross profit margin at 57.9%, both around peak levels, demonstrating resilience despite industry headwinds.

  • Finished goods volume increased by 3.8% YoY to 14,457 MT, with realizations remaining strong at ₹245 per Kg.

  • Significant new order wins including ₹250 crores for European farm equipment, ₹300 crores for wind energy, and ₹180 crores for industrial/data center components.

  • Domestic business grew by almost 7% YoY, countering declines in export segments.

Concerns

  • Export segment saw a decline due to continued weakness in commercial vehicles, off-highway, and farm equipment, coupled with tariff-related uncertainty.

  • US and European CV unit sales declined 8-10% for the April-June quarter, marking 7-8 consecutive quarters of decline.

  • Off-Highway segment experienced softness domestically and globally, with a 10-12% decline in Europe and US.

  • Industry weakness in farm equipment exports, with large OEMs forecasting 5-15% decline for CY25.

Key financials

  1. Revenue ₹354 Cr +3.6%YoY
  2. EBITDA ₹101 Cr
  3. EBITDA Margin 28.6% +3.6%YoY
  4. PAT ₹66 Cr
  5. PAT Margin 18.6% +3.2%YoY
  6. Finished Goods Volume 14,457 MT +3.8%YoY
  7. Realization per Kg ₹245
  8. Gross Profit Margin 57.9%
  9. Machining Share of Revenue 88%

What they filed

Q1 FY27: revenue up 26.8%, net profit up 37.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue361 354 352 354 377 +4%391 +10%424 +20%449 +27%
EBITDA105 101 102 101 116 +10%120 +19%133 +30%141 +40%
Net profit71 65 68 66 73 +3%79 +22%84 +24%91 +38%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Commercial Vehicles
    39% Revenue Contribution
  • Farm Equipment Sector
    32% Revenue Contribution
  • Off-Highway
    10% Revenue Contribution
  • Industrials
    13% Revenue Contribution
  • Passenger Vehicles
    6% Revenue Contribution

Order book

medium confidence

Composition

Mix 3 segments
  • Farm Equipment (Europe) ₹250 Cr 34.2%
  • Wind Energy ₹300 Cr 41.1%
  • Industrial (Data Centers) ₹180 Cr 24.7%

Share of order book by segment, derived from disclosed amounts

Pipeline

other

Another large farm equipment business in discussions in Europe; several businesses quoted for high horsepower line; winds coming up in PV side/European market; CV client setting up transmission plant in India.

Strong business flow and pipeline, especially for European markets given currency situation, and new orders in industrial and wind sectors.

Source: Q&A

Capital allocation

high confidence
  • Capex ₹120 Cr this quarter · ₹300 Cr (FY26) planned
    • Heavyweight precision components infrastructure (part of ₹650 crores plan)
    • PV segment capacity enhancement ₹80 Cr
    • New machining line ₹110 Cr
    • Solar CPP captive power plant ₹60 Cr
    We have committed a capital expenditure of Rs.80 crores, which will go towards enhancing production capacities and strengthening our position in the evolving market. ... We also remain on track with our Rs.650 crores CAPEX plan to create a best-in-class forging infrastructure for heavyweight precision components. ... So, this year's plan is close to Rs.300 crores excluding the CAPEX on the solar side. In Q1, we have done close to Rs.120 crores. Cumulatively, it is close to Rs.300 crores including advances for this year, excluding the solar CAPEX. If the solar CAPEX happens completely in this year, it will be close to Rs.60 to Rs. 70 crores addition to that. ... It is just the capacity addition which has recently happened for which we will be ramping up very soon. So, that is the reason it looks low. But as we ramp up on the new projects for which already we are just waiting for the green signal, these levels will again improve to 84-85% levels, because we have invested close to Rs.110 crores in Quarter 1 on the new line, that is the reason it looks slightly low.
  • Liquidity Cash ₹350 Cr Adequate liquidity to support ongoing investment.
    On the balance sheet front, we continue to maintain a healthy financial position with strong internal accruals and adequate liquidity of more than Rs.350 crores to support ongoing investment.

Guidance & targets

Revenue

  • Revenue Growth Revenue · medium-term · Medium confidence 15-18%
    So, the way we look at is that we are generating 15%-18% kind of a growth from the new businesses. It is just that the markets have to be stable or markets have to start performing well. If the markets are coming back to its normal levels, we will definitely start seeing bigger growth. But in terms of the new product acquisition and new developments, we are very clear that the company is doing its best and is picking up better businesses in terms of realization and profitability, which will kind of help us once the market is back. So, we remain bullish on a medium-term basis on kind of 15%-18% kind of a growth, which we have been doing in the last 10-12 years.

    — Ashish Garg

  • PV Segment Revenue Contribution Revenue · next two years · High confidence 8-10%
    We expect this segment to grow 8-10% of our total revenues over the next two years, with domestic momentum and export contributions both acting as growth levers.

    — Ashish Garg

  • Front Axle Beam Revenue Revenue · next year · High confidence ₹50-60 crores

    Previously ₹30-40 crores → ₹50-60 crores

    Can have close to Rs.50 crores of revenue coming from front axle beam business. This year probably in a range of Rs.30 to 40 crores can ramp to Rs.50 to 60 crores next year.

    — Ashish Garg

Volume

  • Front Axle Beam Units Volume · this year · High confidence 35,000 units

    Previously 3,000-4,000 units → 35,000 units

    And the front axle beam business is ramping up because of the ongoing slowdown in the domestic market the units are little less, but we expect to deliver close to 35,000 units in this year. ... So, last year's numbers will be in a range of 3,000 to 4,000 units for the electric front axle beams and some new launches that we have done.

    — Ashish Garg

Capacity

  • Total Forging Capacity Capacity · High confidence 1,50,000 tons
    During the year, we expect additional commissioning for 10,000-ton press and 4,000-ton press with annual capacity addition of approximately 20,000 MTPA. With this, our total forging capacity will be close to 1,50,000 tons.

    — Ashish Garg

Capex

  • Solar CAPEX Commencement Capex · Q1 FY27 · High confidence Q1 FY27
    And on the second question regards to the solar project, yes, the solar CAPEX is ongoing. And we have already acquired 40 acres of land on this, already signed agreement for this. We expect the project to commence by first quarter of next financial year. We are expecting closure by March, but to be on a safe side, we expect it by first quarter of next financial year.

    — Ashish Garg

What to watch in Q2 FY26

Precision Machine Components for Power Sector

Q4 FY26
Current Ramp-up starting this quarter
Target Full utilization

Why it matters

This is a new ₹145 crores order (₹30 crores annually) expected to contribute to revenue and margin.

So, there was a Rs.145 crores order that we received for the precision machine components for power sector, roughly some Rs.30 crore annually expected to start in 2QFY26. So, just was looking to get some timeline or an update for that? ... Okay. This is for the industrial genset business I think you are talking about which is for the North American market and for which the testing is almost over the line is ready with us and we are expected to start ramp up in this quarter. And we expect full utilization to come from fourth quarter and around 50% utilization by third quarter on this line.

Risks & concerns

  • Commercial Vehicle Industry Slowdown

    high

    Global CV industry operating in a challenging environment, with 8-10% decline in US and European CV unit sales for April-June quarter, and negative outlook for CY25.

    Management acknowledged

  • Export Market Weakness

    medium

    Uncertainty in export markets, influenced by tariff regimes, leading to decline in export segment revenue.

    Management acknowledged

  • Off-Highway Market Softness

    medium

    Softness in off-highway segment domestically and globally (10-12% decline in Europe/US), with subdued sales expected in 2025.

    Management acknowledged

  • Tariff-related Headwinds

    medium

    Possibility of indirect impacts on European market from US tariff measures; direct exposure to US is modest and existing contracts are structured to mitigate tariff impact.

    Management downplayed

Q&A highlights

7 direct
Capacity Utilization vs. EBITDA Margin Direct
So, as I have understood you correctly, yes, the forging utilization right now is around 59%. And that is in terms of tonnage. But in terms of numbers if you see the forging utilization is close to 74% in terms of numbers. So, we have possibility to increase this utilization by almost 18%-20%. As forging infrastructure takes a long time to build, and we have seen a slowdown in the market for the last four, five quarters, we expect once the momentum is there, definitely this utilization levels will improve, because the same die runs will be bigger, longer, and we can easily cash on this opportunity. And definitely, some bit of fixed cost will get divided and definitely there is room for further improvement in terms of EBITDA margin as well as the operational efficiencies will improve.

Analyst questioned how high margins are maintained with lower capacity utilization; management explained the difference between tonnage and number utilization and potential for further margin improvement with increased utilization.

Asked by Pratik Jain

New Order Wins and Execution Direct
HFL has won almost Rs.250 crores business with one of the largest farm equipment OEMs in Europe, which is close to Rs.50 to Rs.60 crores per annum, and for which the work has already been started in terms of development. ... On the wind side as well, we have already won a business close to Rs.300 crores, which comes out to around Rs.60 to 70 crores per annum... Already, a very large order, which we have signed is close to Rs.180 crores per annum, which is on the industrial side and for the large requirement of data centers.

Management provided specific figures for new order wins across farm equipment, wind, and industrial sectors, indicating strong future revenue streams.

Asked by Ronak Mehta

Domestic vs. Export CV Growth and Outlook Direct
At the moment, the European CV business has kind of witnessed almost 8% to 10% fall in the last quarter. And this year, if you are looking at most of the commentaries from the European OEMs we are looking at around kind of a 10% fall in the CV production numbers in Europe. So, if you look at our growth on the CV side, we have picked up some new businesses on the domestic side as far as crankshafts are concerned, and for the CV players, and we expect this ramp up to be very strong going forward as well and this will continue.

Management clarified the split between declining European CV exports and growing domestic CV business due to new orders, providing context for overall CV segment performance.

Asked by Ronak Mehta

Impact of Raw Material Prices on Realization Direct
It was close to Rs.4 to 5 a Kg. If you see in percentage terms, it is close to 3%, 3.5%. ... So, despite of fall in raw material prices, the realizations remain flat, which shows overall improvement in the realization despite of a falling steel price.

Management explained that despite a 3% raw material price correction, realizations remained flat, indicating improved value-addition components and strong pricing power.

Asked by Vijay Pandey

US Tariffs and Impact on Exports Direct
So, our direct exposure to US currently is around 3% to 4%, where at the moment, we are not selling on the basis of DAP. So, we are not in discussions for the tariffs at the moment for this business. ... But if the tariff settles at 25%, 26% for the automotive components, I think we are in a safe situation. Because if you look at the currency has played out well, the steel prices also have gone down from the settlement which has happened in the last two years. So, we are not looking at sharing these tariffs at all for the businesses as we work on a model basis where the model is completely signed off with the OEM.

Management clarified that current US exposure is low and existing contracts are structured to protect them from tariff impacts, though future new business might be affected by market slowdowns.

Asked by Vijay Pandey

Domestic Farm Equipment Growth vs. Industry Partial
Depending on customer-to-customer, it will vary by 1% or 2%, but we are more or less aligned. I do not think it depends on the production or some stock levels over there. More or less, it is kind of aligned only.

Analyst questioned why the company's domestic farm equipment growth was slightly lower than the industry's double-digit growth, with management indicating it's broadly aligned.

Asked by Akash Vora

Heavyweight Forging CAPEX and Segment Traction Direct
So, we have already received orders from the wind sector. And these are very large components up to the weight range of 1.2 tons. And also, the first order that we have received for large engine families, those engines will be delivered for data center application, which is a large order of almost Rs.180 crores as a full machine order.

Management detailed the specific segments (wind, data centers) showing early traction for the new heavyweight forging capacity, providing clarity on the utilization of the ₹650 crores CAPEX.

Asked by Mitul Shah

Revenue Growth Guidance for FY26 and Medium Term Direct
So, the way we look at is that we are generating 15%-18% kind of a growth from the new businesses. It is just that the markets have to be stable or markets have to start performing well. If the markets are coming back to its normal levels, we will definitely start seeing bigger growth. But in terms of the new product acquisition and new developments, we are very clear that the company is doing its best and is picking up better businesses in terms of realization and profitability, which will kind of help us once the market is back. So, we remain bullish on a medium-term basis on kind of 15%-18% kind of a growth, which we have been doing in the last 10-12 years.

Management reiterated a medium-term growth outlook of 15-18% driven by new businesses, acknowledging that overall growth depends on market recovery.

Asked by Preet

2 min read 6 chapters

Detailed narrative

Q1 FY26 Performance Overview

Happy Forgings reported a resilient Q1 FY26 with revenue reaching ₹354 crores, marking a 3.6% year-on-year growth. This growth was achieved despite a 3% raw material price correction. The company maintained strong profitability with a gross profit margin of 57.9% and an EBITDA margin of 28.6%, which is up 3.6% on a YoY basis. PAT stood at ₹66 crores, reflecting an 18.6% margin, up 3.20% YoY, demonstrating sustained performance amidst industry headwinds.

Volume and Realization Trends

Finished goods volume for the quarter increased by 3.8% year-on-year, reaching 14,457 MT. Realizations remained strong at ₹245 per Kg on a year-on-year basis, supported by a higher share of value-addition components. The machining share of revenue remained robust at 88%, indicating a continued focus on precision-engineered components. The company also improved cash flows by concluding negotiations on payment terms and INCOTERMS with some customers.

Segmental Performance and Diversification

Domestic business grew by almost 7% YoY, while the export segment declined due to weakness in commercial vehicles and off-highway. Commercial Vehicles contributed 39% to revenue, Farm Equipment 32%, Off-Highway 10%, Industrials 13%, and Passenger Vehicles 6%. The company's diverse segment mix is a key strength, helping to weather global volatility and capitalize on domestic structural demand. The PV segment is expected to grow to 8-10% of total revenues over the next two years.

New Business Wins and Order Pipeline

Happy Forgings secured significant new orders, including ₹250 crores for farm equipment from a European OEM (₹50-60 crores per annum), ₹300 crores for the wind energy sector (₹60-70 crores per annum), and a large ₹180 crores annual order for industrial components for data centers. The company is also in discussions for another large farm equipment business in Europe and has quoted for several high-horsepower line businesses, indicating a strong pipeline for future growth.

CAPEX and Capacity Expansion

The company is on track with its ₹650 crores CAPEX plan for heavyweight precision components. During the year, an additional 20,000 MTPA capacity will be commissioned through 10,000-ton and 4,000-ton presses, bringing total forging capacity to nearly 1,50,000 tons. For Q1 FY26, ₹120 crores was spent on CAPEX, with a total FY26 plan of ₹300 crores (excluding solar). An additional ₹80 crores CAPEX is committed for the PV segment, and ₹110 crores was invested in a new machining line in Q1.

Market Headwinds and Tariff Situation

The global commercial vehicles industry continues to face challenges, with US and European OEMs reporting 8-10% decline in unit sales. The Off-Highway market also saw a 10-12% decline in Europe and US. While tariff-related headwinds persist, particularly a 25-26% tariff for automotive components to the US, management believes its direct exposure is modest (3-4%) and existing contracts are structured to protect against tariff impacts, with no plans to share tariff increases.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Capital Goods earnings calls